Treasuries started the morning lower but finished yesterday higher on a market oddity that follows large corporate debt issuance. Companies will either short Treasuries or enter into interest rate swaps in order to hedge against the risk of rates rising from the time the company decides to issue bonds to when the bonds actually price in the market. When a large amount of hedges are unwound all at once, it can have a material impact on the market. Short-staffed trading desks due to the vacation season exacerbated the move upward.
Atlanta Fed President Dennis Lockhart spoke yesterday on the Fed’s exit strategy, saying, "One should not assume at this point that extraordinary measures to shrink the balance sheet are required to contain inflationary pressures." Bernanke is scheduled to start two days of testimony today, where he is likely to continue the same sort of message. Although the minutes from the previous FOMC meetings show some member’s hesitation to increase lending and securities purchase programs, according to public statements by Lockhart and other Fed presidents a tighter overall policy is still a ways off. We will be listening to Bernanke’s comments closely to see if any more insight is given by the Fed Chairman.
Atlanta Fed President Dennis Lockhart spoke yesterday on the Fed’s exit strategy, saying, "One should not assume at this point that extraordinary measures to shrink the balance sheet are required to contain inflationary pressures." Bernanke is scheduled to start two days of testimony today, where he is likely to continue the same sort of message. Although the minutes from the previous FOMC meetings show some member’s hesitation to increase lending and securities purchase programs, according to public statements by Lockhart and other Fed presidents a tighter overall policy is still a ways off. We will be listening to Bernanke’s comments closely to see if any more insight is given by the Fed Chairman.
Cliff J. Reynolds Jr.
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