Investors should "brace themselves" for further volatility, as uncertainty is likely to remain, said?Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
Municipals largely stayed in their own lane Wednesday, digesting the large slate of new issues as supply dwindles heading into election week, with Bond Buyer 30-day visible supply falling to $5.56 billion.
Analysts remain divided about what the stronger-than-expected consumer price index will mean for Federal Reserve policymakers since the Fed appears to be concentrating on the labor market.
Federal Reserve chair Jerome Powell flagged a recent upward revision to income and savings data as a sign of economic strength. He said the information could factor into the central bank's monetary policy discourse during the Fed's next interest rate meeting in November.
This week, Federal Reserve Gov. Michelle Bowman cast the first dissenting vote at an FOMC meeting in years. On Friday, she explained why the economic data she's seen didn't convince her of the need to cut rates as much as her fellow governors thought.
Given the Fed's reluctance to "surprise markets or take actions that could be perceived as overtly political," Interactive Brokers Chief Strategist Steve Sosnick said, "we find it hard to believe that anything other than 25 bp is the likely outcome for the upcoming FOMC meeting."
Household ownership of individual bonds was the largest category of muni ownership at 44.6%, mutual funds at 19.2%, exchange-traded funds at 3.1% and U.S. banks at 12.4%. While not detailed in the Federal Reserve data, SMAs may hold up to $1.6 trillion currently.
The Federal Reserve's inspector general says the reserve bank CEO did not trade on confidential information or have conflicts of interest, but did violate central bank rules and policies.
The August consumer price index showed inflation remains above the Federal Reserve's target level and makes a 50-basis-point?rate cut next week?unlikely, economists said. Further, many expect the market will be disappointed going forward, as future cuts will likely be shallower than expected.
Patrick Harker, the longest serving regional reserve bank president, will leave office in June 2025. Directors at the Fed bank have started the search for his replacement.
Federal Reserve Gov. Michelle Bowman said she has concerns about an uptick in inflation and will need to see more positive data before supporting an interest rate cut.
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.
Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.