instant-view:-fed-announces-surprise-rate-cut-to-counter-coronavirus-impact

Instant View: Fed announces surprise rate cut to counter coronavirus impact

Business

NEW YORK (Reuters) – The U.S. Federal Reserve cut interest rates on Tuesday in an emergency move designed to shield the world’s largest economy from the impact of the coronavirus.

In a statement, the central bank said it was cutting the fed funds rate half a percentage point to a target range of 1.00% to 1.25%.

HIGHLIGHTS:

STOCKS: The S&P 500 jumped, then turned lower again and was last off 0.32%

BONDS: The 10-year U.S. Treasury note yield, spiked then turned lower was last at 1.0897%; The 2-year note yield fell to 0.7662%

FOREX: The US dollar index =USD was down almost half a percent

WILLIE DELWICHE, INVESTMENT STRATEGIST, BAIRD, MILWAUKEE

“It seems like an odd time to do it after yesterday’s bounce. It doesn’t do anything for the economy, but I think it probably helps the markets. The import of it is a messaging that we are in control and maybe everyone should settle down. The risk is the market shrugs it off.”

JUSTIN LEDERER, INTEREST RATE STRATEGIST, CANTOR FITZGERALD, NEW YORK

“I’m a little surprised. I didn’t expect that at 10 O’clock today, I thought you’d see something coordinated among central banks. The biggest takeaway from here is the steepening of the curve, the 2s/10s jumped almost 7 basis points. It’s a big, big steepening here… I’m surprised that it’s today. I’m not surprised that they went, but I thought it would be more of a coordinated and not out of the blue at 10 O’clock.”

Compiled by Alden Bentley