…little borrowed, made the market blue. A mostly positive tone across the broader markets wasn’t enough to offset the anticipation of Fed Chairman Powell’s comments – a rate cut was all but ruled out – at the conclusion of the two-day FOMC policy meeting, temporarily calling an abrupt halt to the parade of high-grade issues we’ve seen this week. However, for the first time in four years, a new issue – Athene Global Funding’s $600m 3yr offering of FA-backed notes – floater tranche, the twelfth of the year, was dropped - the type of security that is mostly impervious to whatever the Fed has to say – was priced on “Fed” day. That brought ex-SSA issuance for the week to $39.95bln, topping all weekly estimates, and the month to $49.7bln.

While improved sentiment had little to do with the Fed, investors choose to concentrate on the optimistic news that Treasury Secretary Bessent and top trade official Jamieson Greer would meet with their Chinese counterparts this week in Switzerland, though Bessent did stress that the talks would be mostly preliminary at best. Still, the market seems to jump on every tariff headline.

As for the Fed, who kept their hands off interest rates as expected, there was nothing new, and a lot of old. Chairman Powell issued a word of caution when it comes to tariffs and their effect on the economy. Powell said, “If large tariff increases are sustained, we’re likely to see higher inflation and lower employment.” However, he also said, “Our current stance allows us to wait for further clarity on fiscal policy impact. We don’t have to be in a hurry. We can wait to see how everything plays out.”

That, to some degree, leaves the door open for the Fed to cut interest rates sometime down the road, though President Trump’s proposed tariff policy is widely viewed by economists as inflationary, which could keep the Fed on the sidelines a bit longer than the market had hoped for. Traders in the Fed Funds futures market are now putting the odds of a rate cut in June at 28.6%, down substantially from the 63.2% chance last week, while the odds of a rate in July have increased from 35% last week to 56.8% today.

However, Powell’s comments appear to have little impact on the stock market where the Dow, up from the get-go, closed 284 points higher, as did the S&P500 (0.43%), though just barely. Even the Nasdaq (+0.27%), which was dogged all day by a decline in the shares of Alphabet (-8%) and Apple (-4%) - even their recent bonds traded wider in the secondary market - after a report quoted Apple’s services chief as saying he believes that AI search engines will eventually replace standard search engines such as Google, was able to rally into the close. The late day rally was attributed to comments from President Trump who will reportedly rescind global chip curbs amid AI restrictions debate.

The Treasury market wasn’t all that impressed with what the Fed chairman had to say, though yields did fall fractionally. The benchmark 10yr note, which closed at 4.30%, saw its yield edge 4bp lower to 4.26%, as did the long bond yield falling to 4.77%. In the meantime, the 2yr note yield was unchanged at 3.77% as hopes of a rate cut as soon as next month evaporated.

With little market reaction to the Fed, we fully expect the flow of high-grade issuance to ramp back up tomorrow as more and more companies exit their earnings blackout periods, and see no reason to wait for interest rates to go lower.

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