Despite oil prices stabilizing, the general risk-off tone persisted overnight. Treasury yields and S&P 500 futures are both modestly lower to start the morning. There really weren’t any major headlines overnight, but there is still a lot of focus on the attack on Saudi oil production, particularly as it relates to supply disruption and any potential military response. Overnight funding markets have come under stress for a second day in a row, sending repo and other money market rates higher. The primary catalyst for the move has been a large withdrawal of corporate cash from money market funds in preparation for tax payments, and with the effective fed funds rate moving above the top end of the target range, the Fed is expected to utilize its repo facility to dampen this short-term funding squeeze. A Reuters article released today discusses a growing divide within the Fed over future policy action. This divide was evident in the last “dot plot,” and while the hawks are focused on a more positive domestic data trend, the doves are concerned that contagion from abroad (trade, geopolitical, etc.) will soon spillover into the U.S. economy.

Jason Haley
Managing Director, Investment Management Group