Rates Steady Ahead of FOMC Decision

Rates little changed ahead of FOMC rate decision, press conference. Swap rates and Treasury yields climbed very modestly on the day, closing little more than a basis point higher ahead of the Fed’s rate decision and Fed Chair Jerome Powell’s press conference tomorrow. The 10-year Treasury yield climbed to 1.32% on the day, and remains firmly in the middle of its recent 1-month range. Elsewhere, equities were challenged once again as the S&P 500 sold off into the close to mark its 4^th straight session of declines. The VIX or “Fear Index” declined as well, but remained elevated at 24.36.

The Organization for Economic Cooperation and Development (OECD) raises its inflation targets through 2022 The OECD pointed to supply-chain disruptions and rising commodity prices in raising its inflation target for consumer prices. The updated forecasts now expect inflation to hit 3.7% in 2021 and 3.9% in 2022 for the Group of 20. The Paris-based organization commented that central banks need to give “…clear guidance about the horizon and extent to which any inflation overshooting will be tolerated.” The report comes out as many central banks will meet this week on their policy updates, with the Fed’s rate policy decision and Chairman Powell’s press conference taking place tomorrow afternoon.

CRE continues to drive growth in commercial loans for U.S. banks in 3Q. The Fed’s H8 loan data release for the week ending 9/8/2021 showed the rebound in CRE lending at small U.S. banks is holding strong. Weekly CRE growth had it’s best week since early August growing at an 8.12% annualized rate, while YTD growth breached 4.0% and is on pace to grow at 5.92% for the year. CRE lending at large U.S. large banks contracted during the week after posting three consecutive weeks of growth. Abundance of liquidity continues to hamper both large and small banks with cash balances increasing 43.7% and 30.5%, respectively, on a QTD annualized basis.