The Federal Reserve concludes its policy meeting later today, and it’s a nail-biter. Fed officials are likely to emphasize they’re moving slowly and carefully even if they do decide to start pulling back on their signature bond-buying program, and will also seek to reassure investors that short-term interest rates will stay low well into the future. But the outcome is uncertain on several fronts, so here’s a rundown of what to keep an eye on when the statement comes out at 2 p.m EST.

….rundown HERE

U.S. Treasuries have been on a slow grind lower for most of the morning, but the selling has really started to accelerate on heavy volume in the last few minutes (7:30 am PST)

Right now, 10-year Treasury futrues are down 0.3%. The yield on the 10-year note is at 2.89%, 5 basis points higher from yesterday’s close.

All of this comes before the Federal Reserve’s big FOMC announcement at 2 PM ET. The Wall Street consensus is that the Fed will announce the first reduction in the pace of monthly bond purchases it makes under the quantitative easing program it introduced in September 2012. 

Quotable

“If we become increasingly humble about how little we know, we may be more eager to search.”

                                                      Sir John Templeton

I’m not sure what the Fed will share with us tomorrow.  But I am looking for a bounce to 136^32 on the 30-yr T-bond futures.  Thus, risking two points to make five isn’t a terrible risk/reward for a short-term trade.  

Regards,

Jack Crooks

Black Swan Capital, www.blackswantrading.com, info@blackswantrading.com

The Economic Data Has Nothing To Do With It

Wall Street expects the Federal Reserve to announce the first reduction in the pace of monthly bond purchases it makes under its quantitative easing (QE) program at the conclusion of its FOMC monetary policy meeting Wednesday.

Right now, the Fed buys $45 billion in U.S. Treasuries and $40 billion in mortgage-backed securities each month – $85 billion of bonds in total – in a bid to stimulate the American economy. The consensus on the Street is that the Fed’s first “tapering” of QE will consist of a $10 billion reduction in monthly purchases, bringing the monthly total to $75 billion.

….more commentary on Frothy Markets, Effectiveness of QE, Bernanke’s Legacy, Fed Credibility & A Shrinking Deficit HERE

Ruth Porat didn’t see it coming.

The Morgan Stanley (MS) banker who advised the U.S. Treasury Department on its rescue of Fannie Mae and Freddie Mac in September 2008 and thought she understood the risks to the financial system had just spent a weekend trying to save Lehman Brothers Holdings Inc. when she got a message: Would she come back to deal with American International Group Inc. (AIG)?

…read more of The risks facing Wall Street 5 years after the financial crisis HERE

A man looks up at the offices of JPMorgan Chase & Co. in London. The ability of banks to hide risk, years after Lehman Brothers Holdings Inc.’s fall, was demonstrated by JPMorgan’s $6.2 billion loss in 2012 on wrong-way derivatives bets by a trader known as the London Whale because his positions were so vast.