Deposit Funding Compass Week of December 14, 2023

Market Commentary: The FOMC left its policy rate unchanged yesterday at 5.25%-5.50%, as expected, but the totality of Fed communication was dovish enough to spur a significant bond rally throughout the afternoon. 2s fell almost 30bp by the end of trading, 5s fell below 4.00% for the first time since July, and 10s fell to 4.01% for the first time since early August. The entire Treasury curve is an additional 5-10bp lower so far in overnight trading as well. While the message from Chair Powell was that future rate hikes are still on the table, it’s fair to characterize yesterday’s meeting as a pivot point for this rate cycle.

Brokered CD funding levels are doing their best to adjust to the volatility in rates though its not a lock-step move and more often than not carries a bit of a lagging effect.  Buy-side expectations can take time to recalibrate and get past the “sticker shock” of considerably lower coupons. Supply will contribute heavily to where levels ultimately land and how successful these indications are, for the time being we are looking to price aggressively and reset CD market funding.

Additional Resources

Deposit Funding Compass Week of July 11, 2024

This morning saw CPI prints come in lower than expected, with inflation falling 0.1% in June and bringing the year-over-year rate near it’s lowest in more than 3 years, supporting the case of those calling for lower rates. Chairman Powell reiterated Wednesday recent price readings have shown “modest further progress,” and “more good data” would…
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Deposit Funding Compass Week of July 3, 2024

The 10-year yield took a leg down following economic releases Wednesday signaling that the labor market is cooling. ADP data showed fewer jobs were added than expected in June, while weekly claims for unemployment benefits came in higher than economists forecast. The latest numbers are a prelude to Friday’s closely watched nonfarm payroll report for…
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Deposit Funding Compass Week of June 26, 2024

The US bond market has worked its way close to breakeven for the year, thanks to two straight months of gains that have left the benchmark Treasury index down just 0.15% for 2024. With traders focused on every data point, extending the current run will require sustained evidence of a slowing economy and softer inflation…
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CU Funding Compass Week of June 26, 2024

The US bond market has worked its way close to breakeven for the year, thanks to two straight months of gains that have left the benchmark Treasury index down just 0.15% for 2024. With traders focused on every data point, extending the current run will require sustained evidence of a slowing economy and softer inflation…
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CU Funding Compass Week of June 20, 2024

The bond market has recently seen signs of improvement, with the benchmark 10-year Treasury note yield recently giving back a chunk of its 2024 gains. Investors are betting that cooling US prices will convince the Federal Reserve to cut interest rates sooner and by more than officials have signaled, effectively putting a lid on how…
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Deposit Funding Compass Week of June 20, 2024

The bond market has recently seen signs of improvement, with the benchmark 10-year Treasury note yield recently giving back a chunk of its 2024 gains. Investors are betting that cooling US prices will convince the Federal Reserve to cut interest rates sooner and by more than officials have signaled, effectively putting a lid on how high Treasury…
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Deposit Funding Compass Week of June 13, 2024

Policymakers kept rates steady at a more than two-decade high on Wednesday and dialed back their forecasts to pencil in just one quarter-point rate cut by year end, about half of what markets are pricing in. This morning’s PPI report had already delivered what traders were waiting for, the key measure of inflation cooled to…
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CU Funding Compass Week of June 13, 2024

Policymakers kept rates steady at a more than two-decade high on Wednesday and dialed back their forecasts to pencil in just one quarter-point rate cut by year end, about half of what markets are pricing in. This morning’s PPI report had already delivered what traders were waiting for, the key measure of inflation cooled to…
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CU Funding Compass Week of June 6, 2024

Bonds fell yesterday as traders weighed mixed economic data for clues on the Federal Reserve’s next steps. Earlier Wednesday, a private payrolls reading highlighted that hiring at US companies grew at the slowest pace since the start of the year. Traders are now gearing up for Friday’s monthly payrolls report, which is expected to show…
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Deposit Funding Compass Week of June 6, 2024

Bonds fell yesterday as traders weighed mixed economic data for clues on the Federal Reserve’s next steps. Earlier Wednesday, a private payrolls reading highlighted that hiring at US companies grew at the slowest pace since the start of the year. Traders are now gearing up for Friday’s monthly payrolls report, which is expected to show…
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