The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0619 GMT - It is becoming clear that markets will have to get used to an "anti-forward guidance" world, says Danny Zaid at TwentyFour Asset Management in a note after Fed Chairman Warsh's press conference on Wednesday. The Fed's new language, which states that "the accumulation of more information" will determine the appropriate stance of monetary policy, offered markets few additional clues as to the Fed's reaction function ahead of the December meeting, the member of the multi-sector bond portfolio management team says. It suggests the committee remains to an extent data-dependent at this time. "This is consistent with [Fed Chairman Kevin] Warsh's preferred approach of providing as little forward guidance as possible," Zaid says. (emese.bartha@wsj.com)
0608 GMT - Bond yields have moved to the 'old normal'--a market regime more consistent with the period before the Global Financial Crisis, says Marsh's Julius Bendikas. "We believe the higher cost of capital is consistent with strong nominal GDP growth and elevated energy prices, and we don't expect a return to ultra-low interest rates any time soon," the U.S. head of economics and dynamic asset allocation says. However, some bond markets now present opportunities not seen in two decades, he says. Marsh is cautiously optimistic on U.S. Treasurys, finds U.K. gilts the most attractive developed market government bond opportunity, likes Australian bonds, and is "warming" to Japanese and Canadian bonds. (emese.bartha@wsj.com)
0558 GMT - Federal Reserve Chairman Kevin Warsh seemed to take some comfort that financial conditions were tighter since the last meeting but was unwilling to call them tight, says Greg Gizzi at Nomura Asset Management International. "The Fed seems willing to take a methodical approach, but work remains to be done to bring inflation back to their target," says the CIO of fixed income and head of municipal bonds. Nomura anticipates that the Fed will still need to increase interest rates to achieve its inflation target. (emese.bartha@wsj.com)
0549 GMT - After the Federal Reserve left interest rates on hold on Wednesday, as expected, "the market continues to largely believe December will see another hike," says Catalyst Fund's Larry Holzenthaler. "With two dissents, one would have to believe that a hike in December is a certainty," the senior portfolio manager says. "Chairman Kevin Warsh's remarks also seem to indicate that the Fed's primary focus is on price stability versus the jobs market," he says. Holzenthaler says he would "certainly not assume that the Fed is done raising rates listening to his remarks." Money markets price in a 83% probability of a 25-basis-point rate hike at the December policy meeting, according to LSEG.
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