Rates spike on Fed comments, cut to U.S. credit outlook

Nov. 13:

Rates were back up this morning after taking a nosedive following the modest employment report published Nov. 3. At that point, all of the potential future interest rate hikes seemed unlikely, according to the Fed funds futures market.  

Over the last few days, however, a succession of Federal Reserve officials hastened to remind us that it is too soon to call an end to the process of controlling inflation. It culminated in Fed Chair Jerome Powell’s speech on Friday reminding us, as he has consistently, that inflation is still too high, that the fight to contain it still has a long way to go and that the Fed is keeping its options open for future actions, which will be data driven.

On top of that, Moody’s Investors Services, while preserving the government’s AAA rating, changed its outlook on the U.S. credit rating to negative. The market also remains nervous ahead of tomorrow’s key Consumer Price Index report.

While the chance of a further rate hike remains at only 30% per the futures market, Treasury yields spiked higher this morning than they were before the employment report was published.

Economic calendar

Tuesday, Nov. 14

• Consumer Price Index

Wednesday, Nov. 15

• Advance Retail Sales
• Producer Price Index
• Empire State Manufacturing Survey
• Business Inventories

Thursday, Nov. 16

• Industrial Production/Capacity Utilization
• Philadelphia Fed Manufacturing Business Outlook
• Weekly Initial Jobless Claims
• Import Price Index

Friday, Nov. 17

• Housing Starts/Building Permits

Treasury calendar

There are no auctions of Treasury notes or bonds this week.

By Mike Kraft, Executive Director and Commercial Real Estate Treasurer for Commercial Banking