22 September 2016 by lberuti
The Fed applied their perennial mantra once again yesterday: tough talking, no hiking. They once again told us that they are very close to a hike, but could not get comfortable enough to pull the trigger. On the hawkish side, there was one difference with earlier meetings, as 3 members of the board voted against the status quo. On the dovish side, the median estimate by Fed members for the number of rate hikes by the end of 2017 was lowered. The market decided to focus on the scaling back of the tightening plan, and on the Fed’s concern about market stability. The relief that no central bank will come and spoil the party for a while was obvious and drove risky assets up across the board. Credit indices took part in the general rally, and protection was far easier to buy than sell throughout the session. Once Monday’s roll is factored in, they are at their tightest levels of the year and it took some headline regarding Monte Paschi having to turn to the Italian government for state aid to prevent them from breaking out decisively out of their previous range.