Bank Stocks Bounce Hard On QE4 Hints But Bonds & Bullion Rebuff Powell Promise

After two days of liquidity issues in the repo market, prompting the biggest Fed response in over a decade, Jay Powell proudly proclaimed that there was nothing to see here, move along…

[youtube https://www.youtube.com/watch?v=aKnX5wci404]

The market wasn’t buying it…

Until of course, Powell suddenly got the tap on the shoulder and promised “moar”:

“It is certainly possible that we’ll need to resume the organic growth of the balance sheet sooner than we thought.”

In other words – QE is coming, just not yet… and stocks rebounded excitedly…

By the end of the day, stocks had pushed back up to the highs of the day… (but gold, bonds and the dollar shurgged off the QE4 hint)…

 

S&P and Nasdaq did their best to scramble back to unchanged on the week…

S&P 500 algos were all about 3,000 once again…

 

Banks were the big gainers on the day as rates surged…

Source: Bloomberg

Very mixed picture across the curve today with yields rising after The Fed but on the day, the long end was lower in yield (30Y -3bps) and short-end higher (+3bps)…

Source: Bloomberg

The 2Y Yield spiked back top unchanged on the week (ignoring the QE4 hints)…

Source: Bloomberg

30Y yields rose very modestly on The Fed but ended lower on the day (again ignoring Powell’s QE4 hints)

Source: Bloomberg

The yield curve flattened notably – policy errorishly…

Source: Bloomberg

The dollar spiked – on the relatively hawkish Fed statement – ignoring his more dovish promises…

Source: Bloomberg

Cryptos were mixed again with Bitcoin flat but Altcoins gaining ground

Source: Bloomberg

In commodityland, everything was lower (stronger dollar) with WTI worst (surprise build and reduction in war rhetoric) and gold actually outperformed…but on the week copper is weakest

Source: Bloomberg

Gold was monkeyhammered lower – erasing the post-Saudi-bombing gains, before bouncing…

Source: Bloomberg

Silver rebounded more aggressively…

Source: Bloomberg

 

Finally, to circle back to where we started, The Fed has totally lost control over its rate transmission process – we will have to see if the IOER cut today and Powell’s promise of ‘moar’ will make any difference…The effective fed funds rate printed outside of the central bank’s target band Tuesday for the first time since the financial crisis.

Source: Bloomberg

Additionally, we note that the market is now pricing in less than one more rate cut for the rest of the year…

Source: Bloomberg