FOMC

Returns of all the investment grade options "pale in comparison to those for municipal high-yield," which should bolster Texas gas and Chicago public schools deals.

While no FOMC action on monetary policy is expected, markets are watching for how the Federal Reserve partners with the Biden administration and how it reacts to the 10-year Treasury yield rising from 0.52% on Aug. 4 to 1.15% on Jan. 14.

Fed’s Rosengren calls Biden stimulus plan big yet ‘appropriate’

It’s premature to discuss reducing the amount of monetary-policy support for the U.S. economy while the pandemic is still raging, said Federal Reserve Bank of St. Louis President James Bullard.

Federal Reserve officials said that more fiscal support and the mass distribution of vaccines could lead to a strong U.S. economic recovery in the second half, setting the stage for a discussion of potential tapering of bond buying before year’s end.

Federal Reserve Bank of Richmond President Thomas Barkin says the U.S. could face a bumpy first six months but will be well supported by the rollout of COVID-19 vaccines and fiscal stimulus later in the year.

Transcripts of the Federal Reserve’s 2015 policy meetings show that then-Fed Chair Janet Yellen acknowledged that the Fed should sacrifice potential job gains in order to cut off the possibility of higher inflation.

Federal Reserve officials shouldn’t intervene to slow rising bond yields because that is expected to happen as the U.S. economy recovers, said Federal Reserve Bank of Dallas President Robert Kaplan.

It was inevitable that muni yields would need to rise somewhat as the UST 10-year broke above 1%, however participants said the supply/demand imbalance will keep munis from rising as quickly as Treasuries. More than $1 billion inflows reported.

FOMC members backed maintaining asset purchases, although “a couple” were “open” to “weighting purchases of Treasury securities toward longer maturities,” according to minutes released Wednesday.