Market Focus on Treasury’s Refunding Statement
The Treasury’s refunding statement, set to be released tomorrow, is anticipated to provide crucial details regarding coupon auction sizes. Jim Reid, a strategist at Deutsche Bank, commented that the market awaits these specifics with great interest.
Fed’s Monetary Policy Meeting Takes Center Stage
The pullback in benchmark borrowing costs occurred just before the Federal Reserve’s two-day monetary policy meeting, which commenced on Tuesday. The central bank is widely expected to maintain its benchmark interest rates at a range of 5.25% to 5.50%. Market participants eagerly await the accompanying policy statement and press conference comments from Chair Jerome Powell, seeking insights into the possibility of a rate cut in the coming months.
Fading Probability of Rate Cut
The probability of a 25 basis point rate cut by the Fed’s meeting in March now stands at 47.6%, significantly lower than the 88.5% recorded a month ago. This decline can be attributed to recent positive economic data. Economists at Bank of America, led by Michael Gapen, noted that comments from Fed officials indicate satisfaction with the economy’s overall state and progress made in inflation reduction. Although Gapen’s team believes the easing of policy may be forthcoming, they do not anticipate the Fed signaling such a move on Wednesday.
“The Fed needs to buy time to see more data,” stated Bank of America.
Key Economic Updates Ahead
Notable U.S. economic releases scheduled for Tuesday include the S&P Case-Shiller home price index for November, which is due at 9 a.m. Eastern. This will be followed by the release of the December job openings report and January consumer confidence at 10 a.m.