The Federal Reserve on Wednesday gave relief to money market investors that have been struggling to find high-quality short-term assets by raising two key short-term rates.
The Fed raised the interest rate it pays banks on reserves held at the U.S. central bank at the end of its two-day policy meeting. It also lifted the rate it pays on overnight reverse repurchase agreements, a tool used to set a floor on short-term interest rates. The technical adjustments are aimed at keeping its key overnight benchmark interest rate from falling too low.
The rate hikes are “about relieving some of the strains in the front-end of the curve related to a tsunami of cash in the financial system,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. “Money market funds are finding it hard to get positive yield anywhere and so it addresses some of those problems.”
Treasury bill yields increased after the rate increases, with one-month yields rising to four basis points, from one basis point earlier on Wednesday.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
3 inflation trades and 3 hedging strategies ahead of Fed meetingBillionaire hedge fund manager Paul Tudor Jones says to 'go all in on the inflation trades' if the Fed stays nonchalant about rising prices. Here are 3 trades from top investors, and 3 hedging strategies if the Fed delivers a surprise u-turn.
Read more »
Fed holds interest rates steady, raises inflation forecastThe Fed dramatically raised its forecast for inflation and shifted up the timeline for a rate hike.
Read more »
Asia circles the wagons ahead of Fed, oil eyes 2019 highAsian shares retreated slightly on Wednesday with investors wary of any hint of hawkishness from the U.S. Federal Reserve given lofty asset valuations rely so heavily on an endless supply of super-cheap money.
Read more »
Stocks fall from records ahead of Fed decision on ratesU.S. stocks slipped from their record heights Tuesday as investors wait to hear whether the Federal Reserve will give any clue about when it may let up on its massive support for markets.
Read more »
European markets head for higher open as markets await Fed outcomeEuropean stocks are expected to open slightly higher, as markets await the outcome of the U.S. Federal Reserve's policy meeting on Wednesday.
Read more »
After traders get past this tricky Fed meeting, a confusing second half awaitsEven if the Fed adopts a best-case scenario, the market has a big problem: traders don't know where we are in the economic cycle.
Read more »