MONEY MASTER

Uncertainty over the size of an expected Federal Reserve (Fed) interest rate cut on Wednesday has sparked debate about whether the central bank might accelerate the end of its balance sheet drawdown, known as quantitative tightening (QT) . Speculation is growing in rate futures markets that the Fed might opt for an opening cut of 50 basis points rather than a smaller 25 basis points reduction. A larger cut could signal concerns about the economic outlook, potentially shortening the duration of QT. QT is generally viewed as a liquidity management tool separate from the Fed's interest rate policy, which aims to curb inflation without overly impacting the labor market. However, more aggressive rate cuts could be seen as conflicting with tighter liquidity, depending on the reasons behind the rate reductions. An accelerated end to QT would mark a significant shift in the Fed's balance sheet strategy. A survey of major banks by the New York Fed in July indicated expectations for...

Blue-chip companies in the US are facing increased interest payments on US dollar bonds , and even potential rate cuts by the Federal Reserve (Fed) may not immediately alleviate the trend. According to a note by JPMorgan Chase & Co. , high-grade issuers are expected to pay around $420 billion (RM1.81 trillion) in interest this year, marking an 18% increase from last year. This rate of increase is three times higher than the revenue growth rate for companies in the S&P 500 Index during the second quarter, indicating that rising interest costs are putting pressure on profit growth. Persisting Higher Interest Costs The difference between yields on new bonds and maturing bonds in the US investment-grade market averages about 2.01 percentage points or 201 basis points , according to Bloomberg data. This suggests that higher borrowing costs are likely to continue for several more quarters, even if the Fed cuts rates soon. “Even with some Fed cuts, issuers will still on averag...

The more you look at the financial market and economy, the more uncertainties might surface. When we were coming into 2016, most people were talking about the possibilities of three to four interest rate hikes but just about 2 months down the road, the tone had changed with market participants changing their view to a possibility of the Fed raising the rate as once, if at all, in light of weak inflation and global volatility. But just one new data and we've got people getting up on their feet and watch for Federal Reserves for clues about the US central banks next move because apparently, there is a hot reading on inflation on Friday. Friday's data showed the core consumer price index (CPI), a measure of underlying U.S. inflation, rose in January by the most in nearly 4-1/2 years to a 2.2 percent annualized rate. It drew particular attention as the number was above the Fed's 2.0 percent target, though it is not the central bank's benchmark inflation measure. The up...