{"id":47360,"date":"2024-09-18T21:08:30","date_gmt":"2024-09-19T02:08:30","guid":{"rendered":"https:\/\/prefblog.com\/?p=47360"},"modified":"2024-09-18T21:08:30","modified_gmt":"2024-09-19T02:08:30","slug":"september-18-2024","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=47360","title":{"rendered":"September 18, 2024"},"content":{"rendered":"

The long awaited FOMC rate cut announcement<\/a> came out today:<\/p>\n

Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.<\/p>\n

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.<\/p>\n

In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1\/2 percentage point to 4-3\/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage\u2011backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.<\/p>\n

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.<\/p>\n

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Lisa D. Cook; Mary C. Daly; Beth M. Hammack; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against this action was Michelle W. Bowman, who preferred to lower the target range for the federal funds rate by 1\/4 percentage point at this meeting.<\/p><\/blockquote>\n

Reporters at the New York Times commented<\/a>:<\/p>\n

Michelle Bowman, the one committee member who wanted a smaller cut, seemed concerned about a resurgence in inflation as recently as last month. \u201cI still see some upside risks to inflation as supply conditions have now largely normalized and any further improvements to supply seem less likely to offset price pressures arising from increasing geopolitical tensions, additional fiscal stimulus, and increased demand for housing due to immigration,\u201d she said in remarks to the Alaska Bankers Association.
…<\/b>
The real problem when it comes to housing, Powell says, is the lack of supply \u2014 a long-term problem that is outside of the Fed\u2019s control.
…<\/b>
Federal Reserve officials agree that Wednesday\u2019s rate cut is unlikely to be their last. They are much less united on how far or how quickly they will decide to lower rates moving forward.<\/p>\n

The chart below, known as the \u201cdot plot,\u201d helps tell the story. Each dot represents one Fed official\u2019s forecast for where interest rates will be at the end of each year.<\/p>\n

In 2024, for example, nine of the central bank\u2019s 19 officials expect rates to end the year at about 4.4 percent, half a point below where they stand after the jumbo rate cut on Wednesday. That suggests those officials expect to make more modest, quarter-size cuts in each of the two meetings they have scheduled for the rest of the year.<\/p>\n

But seven policymakers expect just one more cut this year, and two officials expect none. At the other end of the spectrum, one official expects the Fed to cut rates by another three-quarters of a point this year, suggesting another supersize reduction in either November or December.<\/p>\n

All 19 officials expect rates to be lower at the end of next year than they are now. But their estimates of how much lower vary widely, from about 2.9 percent (two full percentage points below where they are after Wednesday\u2019s action) to 4.1 percent (just three-quarters of a point below where they are now). There is an even wider range of views in 2026 and 2027.<\/p>\n

Eventually, most officials expect interest rates to settle between 2.5 percent and 3.5 percent. That\u2019s higher than in the decade before the pandemic, when the Fed\u2019s target interest rate never topped 2.5 percent \u2014 suggesting we may not soon return to the era of ultralow rates that prevailed after the Great Recession.<\/p><\/blockquote>\n

<\/a>
Fed Dot Plot, 2024-9-18<\/div>\n

PerpetualDiscounts now yield 5.98%, equivalent to 7.77% interest at the standard equivalency factor of 1.3x. Long corporates<\/a> yielded 4.77% on 2024-9-13 and since then the closing price of ZLC has changed from 15.55 to 15.51, a decrease of 26bp in price, implying an increase of yields of 2bp (BMO reports a duration of 12.46, but don’t disclose whether this is Macaulay or Modified; I will assume Modified) to 4.79%. Therefore, the pre-tax interest-equivalent spread (in this context, the \u201cSeniority Spread\u201d) has narrowed to 300bp from the 310bp reported September 11<\/a>.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1750 %<\/td>\n2,176.1<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1750 %<\/td>\n4,173.7<\/td>\n<\/tr>\n
Floater<\/td>\n9.89 %<\/td>\n9.96 %<\/td>\n81,044<\/td>\n9.63<\/td>\n2<\/td>\n-0.1750 %<\/td>\n2,405.3<\/td>\n<\/tr>\n
OpRet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0507 %<\/td>\n3,563.2<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.67 %<\/td>\n5.14 %<\/td>\n34,786<\/td>\n1.08<\/td>\n4<\/td>\n-0.0507 %<\/td>\n4,255.2<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0507 %<\/td>\n3,320.0<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.1951 %<\/td>\n2,934.0<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.87 %<\/td>\n5.98 %<\/td>\n56,602<\/td>\n13.83<\/td>\n31<\/td>\n0.1951 %<\/td>\n3,199.4<\/td>\n<\/tr>\n
FixedReset Disc<\/td>\n5.48 %<\/td>\n6.60 %<\/td>\n120,370<\/td>\n12.99<\/td>\n58<\/td>\n-0.3252 %<\/td>\n2,664.3<\/td>\n<\/tr>\n
Insurance Straight<\/td>\n5.75 %<\/td>\n5.80 %<\/td>\n68,124<\/td>\n14.22<\/td>\n20<\/td>\n0.8350 %<\/td>\n3,147.7<\/td>\n<\/tr>\n
FloatingReset<\/td>\n8.30 %<\/td>\n8.38 %<\/td>\n34,148<\/td>\n11.05<\/td>\n2<\/td>\n-0.6462 %<\/td>\n2,756.3<\/td>\n<\/tr>\n
FixedReset Prem<\/td>\n6.44 %<\/td>\n5.53 %<\/td>\n222,622<\/td>\n13.58<\/td>\n7<\/td>\n-0.1555 %<\/td>\n2,571.9<\/td>\n<\/tr>\n
FixedReset Bank Non<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.3252 %<\/td>\n2,723.4<\/td>\n<\/tr>\n
FixedReset Ins Non<\/td>\n5.19 %<\/td>\n5.94 %<\/td>\n96,226<\/td>\n14.09<\/td>\n14<\/td>\n-0.3872 %<\/td>\n2,830.8<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
BIP.PR.A<\/td>\nFixedReset Disc<\/td>\n-10.84 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 19.00
\nEvaluated at bid price : 19.00
\nBid-YTW : 8.16 %<\/td>\n<\/tr>\n
BN.PF.G<\/td>\nFixedReset Disc<\/td>\n-5.53 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 17.76
\nEvaluated at bid price : 17.76
\nBid-YTW : 7.72 %<\/td>\n<\/tr>\n
MFC.PR.F<\/td>\nFixedReset Ins Non<\/td>\n-2.14 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 16.00
\nEvaluated at bid price : 16.00
\nBid-YTW : 6.20 %<\/td>\n<\/tr>\n
BN.PF.C<\/td>\nPerpetual-Discount<\/td>\n-1.50 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 19.70
\nEvaluated at bid price : 19.70
\nBid-YTW : 6.19 %<\/td>\n<\/tr>\n
IFC.PR.C<\/td>\nFixedReset Ins Non<\/td>\n-1.18 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.00
\nEvaluated at bid price : 21.00
\nBid-YTW : 6.16 %<\/td>\n<\/tr>\n
FFH.PR.D<\/td>\nFloatingReset<\/td>\n-1.13 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.80
\nEvaluated at bid price : 21.80
\nBid-YTW : 8.38 %<\/td>\n<\/tr>\n
FFH.PR.G<\/td>\nFixedReset Disc<\/td>\n-1.02 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 17.45
\nEvaluated at bid price : 17.45
\nBid-YTW : 7.39 %<\/td>\n<\/tr>\n
MFC.PR.N<\/td>\nFixedReset Ins Non<\/td>\n1.03 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 20.61
\nEvaluated at bid price : 20.61
\nBid-YTW : 6.11 %<\/td>\n<\/tr>\n
CU.PR.D<\/td>\nPerpetual-Discount<\/td>\n1.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 20.72
\nEvaluated at bid price : 20.72
\nBid-YTW : 5.98 %<\/td>\n<\/tr>\n
FFH.PR.K<\/td>\nFixedReset Disc<\/td>\n1.09 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.97
\nEvaluated at bid price : 22.24
\nBid-YTW : 6.82 %<\/td>\n<\/tr>\n
POW.PR.G<\/td>\nPerpetual-Discount<\/td>\n1.38 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 23.17
\nEvaluated at bid price : 23.47
\nBid-YTW : 6.07 %<\/td>\n<\/tr>\n
IFC.PR.E<\/td>\nInsurance Straight<\/td>\n1.47 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 22.52
\nEvaluated at bid price : 22.80
\nBid-YTW : 5.71 %<\/td>\n<\/tr>\n
SLF.PR.C<\/td>\nInsurance Straight<\/td>\n1.73 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 20.55
\nEvaluated at bid price : 20.55
\nBid-YTW : 5.44 %<\/td>\n<\/tr>\n
ENB.PF.E<\/td>\nFixedReset Disc<\/td>\n2.56 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 17.61
\nEvaluated at bid price : 17.61
\nBid-YTW : 7.58 %<\/td>\n<\/tr>\n
GWO.PR.G<\/td>\nInsurance Straight<\/td>\n9.84 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 22.10
\nEvaluated at bid price : 22.32
\nBid-YTW : 5.84 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
POW.PR.D<\/td>\nPerpetual-Discount<\/td>\n129,800<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.45
\nEvaluated at bid price : 21.45
\nBid-YTW : 5.94 %<\/td>\n<\/tr>\n
PWF.PR.K<\/td>\nPerpetual-Discount<\/td>\n103,600<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.16
\nEvaluated at bid price : 21.16
\nBid-YTW : 5.95 %<\/td>\n<\/tr>\n
CM.PR.Q<\/td>\nFixedReset Disc<\/td>\n68,700<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 23.49
\nEvaluated at bid price : 24.07
\nBid-YTW : 5.65 %<\/td>\n<\/tr>\n
BMO.PR.W<\/td>\nFixedReset Disc<\/td>\n42,100<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 23.67
\nEvaluated at bid price : 24.65
\nBid-YTW : 5.02 %<\/td>\n<\/tr>\n
GWO.PR.Y<\/td>\nInsurance Straight<\/td>\n39,177<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 19.40
\nEvaluated at bid price : 19.40
\nBid-YTW : 5.83 %<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nInsurance Straight<\/td>\n30,900<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 20.25
\nEvaluated at bid price : 20.25
\nBid-YTW : 5.59 %<\/td>\n<\/tr>\n
There were 8 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
BIP.PR.A<\/td>\nFixedReset Disc<\/td>\nQuote: 19.00 – 21.49
\nSpot Rate : 2.4900
\nAverage : 1.5459<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 19.00
\nEvaluated at bid price : 19.00
\nBid-YTW : 8.16 %<\/td>\n<\/tr>\n

BN.PF.G<\/td>\nFixedReset Disc<\/td>\nQuote: 17.76 – 18.76
\nSpot Rate : 1.0000
\nAverage : 0.7086<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 17.76
\nEvaluated at bid price : 17.76
\nBid-YTW : 7.72 %<\/td>\n<\/tr>\n

BN.PR.X<\/td>\nFixedReset Disc<\/td>\nQuote: 15.21 – 16.90
\nSpot Rate : 1.6900
\nAverage : 1.4209<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 15.21
\nEvaluated at bid price : 15.21
\nBid-YTW : 7.55 %<\/td>\n<\/tr>\n

PWF.PR.Z<\/td>\nPerpetual-Discount<\/td>\nQuote: 21.75 – 22.33
\nSpot Rate : 0.5800
\nAverage : 0.3675<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.75
\nEvaluated at bid price : 21.75
\nBid-YTW : 6.02 %<\/td>\n<\/tr>\n

MFC.PR.I<\/td>\nFixedReset Ins Non<\/td>\nQuote: 24.26 – 24.85
\nSpot Rate : 0.5900
\nAverage : 0.4132<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 23.09
\nEvaluated at bid price : 24.26
\nBid-YTW : 5.84 %<\/td>\n<\/tr>\n

IFC.PR.C<\/td>\nFixedReset Ins Non<\/td>\nQuote: 21.00 – 22.50
\nSpot Rate : 1.5000
\nAverage : 1.3537<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2054-09-18
\nMaturity Price : 21.00
\nEvaluated at bid price : 21.00
\nBid-YTW : 6.16 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The long awaited FOMC rate cut announcement came out today: Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-47360","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/47360","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=47360"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/47360\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=47360"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=47360"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=47360"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}