Treasuries extended their rally into the overnight session and opened this morning around a basis point lower, with the 10-year hitting its lowest level since January 8th, 2018. In its meeting yesterday, the Federal Open Market Committee voted unanimously to leave the target range unchanged at 2.25% to 2.50%. The committee reiterated language from the January meeting, stating that the central bank will remain patient due to “global economic and financial developments and muted inflation pressures.” The committee also projects zero rate hikes this year, down from two. They also revised their expectation for 2019 GDP lower to 2.1% from 2.3% and lowered the 2020 outlook to 1.9% from 2.0%. The market reacted strongly to this news of no further rate hikes, with stocks moving briefly into positive territory and the Treasury curve shifting 8 to 10 basis points lower.

In addition to its economic projections, the Fed also shone light on its plan for balance sheet normalization; stating that the central bank would begin to taper the pace of the unwinding in May, by lowering the reinvestment cap on Treasuries from $30 billion to $15 billion, and stop the runoff completely in September. Additionally, as expected, the Fed announced that they would roll the runoff from its MBS portfolio into Treasury securities starting in October. Initially this reallocation will be capped at $20 billion a month and will be invested in Treasury maturities that will “roughly match the maturity of composition of Treasury securities outstanding”. The Fed also mentioned that would consider “limited sales of agency MBS” to help shape the long-run make up of its balance sheet but mentioned that the “timing and pace of any sales would be communicated to the public well in advance.”

Hafizan Hamzah
Director, Investment Management Group
Date TimeEventSurveyActualPriorRevised
3/18/2019NAHB Housing Market IndexMar636262
3/19/2019Factory OrdersJan0.30%0.10%0.10%
3/19/2019Factory Orders Ex TransJan-0.20%-0.60%-0.50%
3/19/2019Durable Goods OrdersJan F0.40%0.30%0.40%
3/19/2019Durables Ex TransportationJan F-0.10%-0.20%-0.10%
3/19/2019Cap Goods Orders Nondef Ex AirJan F0.80%0.80%0.80%
3/19/2019Cap Goods Ship Nondef Ex AirJan F0.80%0.80%
3/20/2019MBA Mortgage Applications15-Mar1.60%2.30%
3/20/2019FOMC Rate Decision (Upper Bound)20-Mar2.50%2.50%2.50%
3/20/2019FOMC Rate Decision (Lower Bound)20-Mar2.25%2.25%2.25%
3/20/2019Interest Rate on Excess Reserves21-Mar2.40%2.40%2.40%
3/21/2019Philadelphia Fed Business OutlookMar4.813.7-4.1
3/21/2019Initial Jobless Claims16-Mar225k221k229k230k
3/21/2019Continuing Claims9-Mar1770k1750k1776k1777k
3/21/2019Bloomberg Consumer Comfort17-Mar61.560.8
3/21/2019Bloomberg Economic ExpectationsMar47.554.5
3/21/2019Leading IndexFeb0.10%-0.10%0.00%
3/22/2019Markit US Manufacturing PMIMar P53.453
3/22/2019Markit US Services PMIMar P55.556
3/22/2019Markit US Composite PMIMar P55.5
3/22/2019Wholesale Inventories MoMJan0.10%1.10%
3/22/2019Wholesale Trade Sales MoMJan-1.00%
3/22/2019Existing Home SalesFeb5.10m4.94m
3/22/2019Existing Home Sales MoMFeb3.20%-1.20%
3/22/2019Monthly Budget StatementFeb-$227.0b-$215.2b