Yesterday saw the release of the April FOMC meeting minutes, where there was not much in the way of surprises and members continue to reiterate the same message. The minutes noted that ‘the Federal Reserve was committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals’.
Although this was very much steady as she goes, there was one interesting piece of information noting that officials are considering some explicit forward guidance for future meetings: ‘While participants agreed that the current stance of monetary policy remained appropriate, they noted that the Committee could, at upcoming meetings, further clarify its intentions with respect to its future monetary policy decisions. Some participants commented that the Committee could make its forward guidance for the path for the federal funds rate more explicit. For example, the Committee could adopt outcome-based forward guidance that would specify macroeconomic outcomes—such as a certain level of the unemployment rate or of the inflation rate—that must be achieved before the Committee would consider raising the target range for the federal funds rate’.
We also saw the reintroduction of the 20-year US Treasury bond, last seen in 1986. The US Treasury Department had been mulling for a while as to whether there was a need or an appetite for the reintroduction of the bond, however that was before the coronavirus pandemic hit. The Treasury has even broached the idea of 50- and 100-year bonds, however it does not believe there would be sufficient demand, so that idea has very much been kicked into the long grass. The new bond performed relatively well, in part due to its limited size of USD20bn but there is also little supply in that part of the curve (there were no 30-year bonds issued between 2001 and 2006). It drew a yield of 1.22%, with a bid-to-cover of 2.53.