Short-term interest rate futures fell Wednesday as Chairman Powell curbed expectations that a long-term easing cycle would start after the Federal Reserve cut interest rates for the first time in a decade.
Powell said at a press conference after the Fed's announcement that the rate cut was "a policy adjustment in a cycle". Traders'interpretation is that this means the Fed is not prepared to implement a series of interest rate cuts.
Powell's comments triggered a sharp drop in interest rate futures, while two-year Treasury yields rose to a two-month high.
But after Powell later said the Fed was more than open to interest rate cuts, interest rate futures and short-term bonds rebounded.
"Overall, the interpretation of the interest rate market is that President Powell sent a confusing and confusing message at a press conference on the outlook for the Federal Fund's target rate, disappointing market participants wishing to get a clearer pigeon signal," Bank of America Merrill Lynch analysts wrote in their research report.
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