Rates Mixed on Eve of Fed Decision

FOMC Preview. Markets have priced in a 75bp rate hike tomorrow, which will bring the Fed’s upper target range to 4%. With a 75bp hike all but certain, the main attraction will be Fed Chair Jerome Powell’s subsequent press conference, and how he looks to position the central bank for the meetings ahead. Rates were mixed ahead of the meeting, and generally rose across a flattening curve, the 2-year Treasury yield climbing to 4.53%- not far from the benchmark’s recent high. Equities meanwhile declined on the day, the S&P 500 falling 0.41% while the Nasdaq Composite fell 0.90%.

US job openings surprise supports hawkish Fed action. US job openings increased in September to 10.7mm from 10.3mm in August, surprising analysts who expected a decline to 9.8mm in the month. An increase in job openings signals continued tightness in the labor market, something that should only serve to embolden the Fed’s hawkish policy actions. The rest of the week remains packed with labor data, highlighted by Friday’s jobs report.

Day Ahead. The ADP’s private payrolls data and mortgage applications will kick off the day. At 2:00 we’ll get the FOMC’s rate decision, with Fed Chair Jerome Powell’s press conference to follow.