Quiet Start to the Week Ahead of Northeast Blizzard and FOMC Meeting

Equities traded mixed while Treasurys sold off across the curve as investors geared up for Wednesday’s Fed announcement and a number of other highly anticipated central bank meetings later this week.  A Bloomberg article published today showed Fed policymakers, economists, and investors all seem to agree that a 25 basis point rate hike is a foregone conclusion when the FOMC meets this week, with Friday’s robust payrolls report clearing the last perceived major hurdle.  Bloomberg surveyed 45 economists last week and the median forecast called for 3 quarter-point hikes in 2017, matching the number Fed officials forecast in December, while trading in Fed funds futures indicated the probability of three or more hikes this year over 50% for the first time earlier this month.  While a Wednesday hike is expected, investors will be focused on the policy statement and Yellen’s press conference for more visibility into the Fed’s thinking/timing going forward. 

Outside of the US, there are several high-profile events scheduled this week as well which could make their impact on market psychology.  The British government could trigger Article 50 at any time, which would officially start the two-year window for Britain to negotiate its departure from the EU.  Additionally, the market gets the results of the Dutch general election on Wednesday, followed by Bank of Japan and Bank of England meetings and policy decisions on Thursday.  Both are widely expected to keep rates and yield-curve policy unchanged.

There were no significant US data releases today, but there was a fair amount of corporate issuance – perhaps trying to get done prior to tomorrow’s expected blizzard in the northeast.  The Dow traded down 0.10% while the S&P 500 and tech-heavy NASDAQ finished the day marginally in the green.  Treasury yields and swap rates were 2-5 bps higher across all major maturities, in a slight bear steepening pattern.  Oil continued its price descent, extending losses to three-month lows as increased US production is creating investor skepticism over OPEC’s ability and impact of restricting output.