Fed Releases Minutes
The latest Minutes of the Federal Open Market Committee, December 13–14, 2016 comment on "Developments in Financial Markets and Open Market Operations," saying, "The manager of the System Open Market Account (SOMA) reported on developments in U.S. and global financial markets during the period since the Committee met on November 1–2, 2016. Nominal yields on longer term U.S. Treasury securities rose substantially over the period, reflecting both higher real yields and an increase in inflation compensation. The value of the dollar on foreign exchange markets rose, U.S. equity indexes increased considerably, and credit spreads on U.S. corporate bonds narrowed. Market pricing and survey results indicated that market participants had come to see a high probability of an increase of 25 basis points in the FOMC's target range for the federal funds rate at this meeting, and that the path of the federal funds rate anticipated by market participants for coming years had steepened." They add, "The manager also reported on developments in money markets and open market operations. Market interest rates on overnight repurchase agreements (repos) fell during the intermeeting period. Market participants pointed to a number of factors contributing to the decline, including lower demands for funding by securities dealers and the ample availability of financing from government-only money market funds (MMFs). The decline in repo rates, together with the shift of MMF assets toward government-only funds, had likely boosted usage of the System's overnight reverse repurchase agreement (ON RRP) facility over the period. In contrast to the decline in interest rates for secured money market transactions, the effective federal funds rate generally remained near the middle of the FOMC's 1/4 to 1/2 percent target range. The manager also reported on the Open Market Desk's regular review of operational readiness for a range of open market operations."
