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Wednesday's Fed policy decision was pretty boring for investors — officials kept interest rates unchanged since July 2023.
But some smart traders are excited about another important decision. The Federal Reserve announced that it would cut interest rates significantly. Quantitative Tightening (QT) Program – That's the Selling Thing of That asset will reduce the money supply and cause interest rates to rise from June.
U.S. Treasury yields fell on the news. The yields on 10-year and 2-year bonds both fell by 0.05 percentage point.
what's happening: The Fed purchased large amounts of government-backed bonds from 2020 to 2022 to help the economy recover after the pandemic-induced recession. These purchases ended up pushing down interest rates in certain sectors of the economy, such as housing and auto sales.
In mid-2022, as inflation spiked, the Fed reversed itself and started releasing these bonds.
The Fed is currently letting up to $60 billion in government bonds mature each month without replacing them, reducing the amount of money in circulation in the economy. The idea is that QT can help put some downward pressure on prices.
However, there are downsides to this practice. Changing the amount of liquidity in the economy and redirecting that money can have significant consequences.
As JPMorgan Chase CEO Jamie Dimon noted in his annual letter to shareholders last month, “We do not expect to see the full effects of quantitative tightening on this scale. I’ve never truly experienced it.” He said that QT's current pace is draining more than $900 billion of liquidity from the system annually, adding: “I'm more worried [about it] More so than most people. ”
QT reduces the amount of money in the banking system, leading to higher interest rates and tighter financial conditions, but the last time the Fed implemented such a program in 2019, some banks failed. very Reserve power is insufficient.
This caused a “repo crisis,'' and overnight lending rates among banks skyrocketed. The Fed had to intervene to lower repo rates and provide liquidity.
Fed Chairman Jerome Powell does not want a repeat of 2019 and said in his last press conference that QT would soon be tapered.
On Wednesday, officials announced they would cut the QT rate to $25 billion, more than half its current level.
Its meaning: “May 1 is likely to be a significant day for bond markets,” Evercore ISI's Krishna Guha and Marco Casiraghi wrote in a recent note.
Bill Adams, chief economist at Comerica Bank, said that if the Fed eases its tightening policy, “financial markets are likely to view the tapering of the QT program as bullish for riskier investments such as marginal stocks and bonds.” I'm writing in a notebook. Tuesday.
Tapering should cause bond prices to rise and interest rates to fall.
Bank of America analysts said Tuesday that “risks are skewed to the stock's upside, especially given the potential QT tapering announcement.”
The Biden administration took steps Tuesday to reclassify marijuana as a low-risk substance, a person familiar with the plan told CNN. This is a historic move that recognizes the medical benefits of a long-criminalized drug and will have far-reaching implications for cannabis-related studies and research. Entire industry.
The U.S. Department of Justice has recommended that marijuana be rescheduled as a Schedule III controlled substance. This is a common classification with prescription drugs such as ketamine and Tylenol, which contain codeine.
“today, [Attorney General Merrick Garland] “We have circulated a proposal to reclassify marijuana from Schedule I to Schedule III,” Justice Department Public Affairs Director Xochitl Hinojosa said in a statement. “Publication in the Federal Register begins the formal rulemaking process prescribed by Congress in the Controlled Substances Act.”
The formal rulemaking process is time-consuming, typically includes a public comment period, and can take several months to complete.
The rescheduling recommendation, first reported by The Associated Press on Tuesday, was welcomed by lawmakers on both sides of the aisle, including Republican Rep. Nancy Mace of South Carolina. I advertised this on X as follows “Big News for Business, Tax Credits and Research Barriers.”
Oregon Democratic Rep. Earl Blumenauer said in a statement that the rescheduling “brings us one step closer to ending our failed war on drugs.”
Please see here for the detail.
Zhao Changpeng, the founder of one of the world's leading cryptocurrency exchanges, was sentenced to four months in prison on Tuesday after pleading guilty to money laundering charges last year, my colleague Alison Morrow reported.
The judgment handed down on The sentence in federal court in Seattle was much lighter than the three years prosecutors had argued.
Ahead of Tuesday's sentencing hearing, Chao, who goes by CZ, apologized for mistakes he made as CEO of the cryptocurrency exchange Binance, which he founded in 2017.
“Words cannot explain how deeply I regret the choices I made that brought me to court,” he said in a letter to the judge. “Don't worry, it won't happen again.”
Last fall, Binance agreed to pay more than $4 billion in fines and other fines as part of a coordinated settlement with the federal government. The company admitted to engaging in anti-money laundering activities, unauthorized transfers, and sanctions violations.
Zhao, 47 and with a personal fortune of nearly $40 billion, agreed to step down as CEO and pay a $200 million fine, according to Bloomberg.
