All Eyes on Wednesday’s FOMC Meeting

Yields decline slightly ahead of Wednesday’s FOMC decision. UST yields edged lower in today’s relatively quiet session, with markets largely looking ahead to this week’s policy decision and updated Dot Plot. The 2-year yield fell 2 bps overnight and was little changed throughout the remainder of the session, now near its lowest level in a year at 3.54%. Price action was similar at the long-end of the curve, with the 10-year yield down 3 bps to 4.04%. Meanwhile, equities rose today on surges in tech mega caps, with the S&P 500 (+0.47%) closing above 6,600 for the first time ever.

Last minute Miran vote, Cook ruling expected ahead of FOMC. The Senate is expected to vote tonight to confirm Stephen Miran as Fed governor, the outcome likely given the Republican majority in the chamber. The vote is expected just hours before the start of the September FOMC meeting tomorrow morning, though reports say Miran will be able to participate if he is confirmed. If the Fed cuts 25 bps as expected, it remains to be seen whether Miran, a close ally of President Trump and key to the White House’s push to lower interest rates, would dissent in favor of a 50 bp cut. There is also uncertainty surrounding current Fed governor Lisa Cook, who is fighting a last-minute bid by President Trump to oust her ahead of the policy meeting. After a judge blocked Cook’s firing on allegations of mortgage fraud, the Department of Justice appealed, requesting a “stay order” to remove her from the Fed while the case proceeds. The Trump administration has requested a ruling by Monday, but as it stands now, Cook will be allowed to participate in Tuesday’s policy meeting.

Slowdown in China’s economic activity puts pressure on a deal. Data showed signs of China’s economy slowing more than expected in August, as industrial output and consumption had its worst month this year, with production levels in factories increasing by just 5.2%, the smallest annual gain since August 2024. The weak data may increase pressure on Chinese negotiators to make a deal with the US, one of the largest importers of Chinese goods. Trade negotiations between the two nations are ongoing, and President Trump will meet with Chinese leader Xi Jinping at the end of this week to continue discussions. The US and China currently have a tariff truce that is set to end in November.