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.