Intermediate and long-end Treasury yields are drifting lower to start the day as investors await today’s FOMC decision while keeping a close eye on the renewed volatility in regional bank stocks. The latter got an initial bump higher in the immediate aftermath of the First Republic rescue, but the KBW Regional Bank Index fell more than 5% yesterday. In specific names, Western Alliance Bank was down more than 15% and PacWest more than 25% yesterday. It is quickly becoming a crisis of confidence, which can overwhelm fundamentals. We will see what Fed Chair Powell has to say about this, if anything, in his press conference this afternoon. The fed funds futures market is pricing an 88% chance of a 25 basis point hike today, but the guidance will be more important for market participants. Multiple former Fed leaders have made comments this week suggesting either a hike and a pause signal (Clarida) or a “hawkish pause,” where the Fed doesn’t hike today but signal that they’re still in a tightening stance (Kaplan). Regardless, rates should be fairly choppy this afternoon as the market digests whatever comes.
Jason Haley
Chief Investment Officer
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