The world’s biggest bond market surged as Jerome Powell downplayed the possibility of rate hikes and the Federal Reserve said it will shrink its balance sheet at a slower pace to ease strains in money markets.
Treasuries climbed across the curve, with two-year yields dropping below 5 per cent. Swap traders boosted their bets on rate cuts and projected higher odds that the first move will happen in November, instead of December. The S&P 500 finished lower — after gaining over 1 per cent during Powell’s press conference — as chipmakers plunged in the final hour of U.S. trading.
“Jay Powell threaded the needle perfectly today,” said Ronald Temple at Lazard. “He did not take the bait to talk about hiking rates — but clearly communicated instead that the question is about when, not if, inflation will resume its decline.”
Fed officials decided to leave the benchmark rate in a range of 5.25 per cent to 5.5 per cent for…
