Post-Fed Rally is “Nice” But Not Quite Exciting

Post-Fed Rally is “Nice” But Not Quite Exciting

In a small vacuum, today’s Fed announcement had a noticeably positive impact on bonds despite yielding “just another day” vibes in the bigger picture. Traders reacted to some combination of a reasonably steady dot plot and the announcement of slower balance sheet shrinkage (which, in turn, implies more bond buying in the short term at the expense of a longer wait before the Fed fully reinvests its balance sheet proceeds). If you don’t understand that last part, don’t worry. It’s arcane.  It is basically a technical adjustment in the pace, but not in the destination. The bottom line is that the adjustment was mildly friendly for bonds today, even if it was a technical adjustment and not an indication of easier monetary policy.