Fed Minutes Squash Hope of Rate Cut

Includes: IEF, LQD, SHY, TIP, TLT
by: David Jackson

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Fed Douses Rate-Reduction Speculation, Stresses Inflation Risk [Bloomberg]

Summary: Minutes of the Fed's Sept. 20th meeting released yesterday failed to mention any prospect of a rate cut but did cite "substantial risk" that inflation, currently at "an undesirably high rate", won't ease. As a result, the implied probability from bond prices of a reduction in interest rates before the March 20-21st Fed meeting fell to 18% yesterday from 82% on October 4th, and for a cut before the January 30-31st meeting to 6% from 36%.
Related links: Bill Gross: Bond Prices Have BottomedRecession Around the Corner?Yield Curve Forecast: Cloudy With a Chance of RainThe Economy's Wake-Up Call: Are Investors Listening?Recession 2007? Philadelphia Fed Index Turns Negative
Potentially impacted bond ETFs: iShares Lehman 1-3 Year Treasury Bond ETFiShares Lehman 7-10 Year Treasury ETFiShares Lehman 20+ Year Treasury Bond ETFiShares Lehman TIPS Bond ETF, iShares GS $ InvesTop Corp Bond ETF.

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