The FOMC maintained the Fed funds target rate at 0.25%-0.50%, in line with consensus and market pricing. Looking at the rate decision, there were three dissenters voting for an immediate hike and since three FOMC members have officially joined the no-hike-this-year camp, we are dealing with a very divided FOMC. International equity markets reacted positively on the news.
iTraxx 5yr Crossover dipped over the past week from 336bps to 327bps, while iTraxx 5yr Main after an increase during the week reverted to 71bps.
NorgesBank (NB) left the sight deposit rate unchanged at 0.50% . The revised rate path suggests a 40% probability of a later rate cut, versus 100% signaled earlier. The rhetoric in the Monetary Policy Report (MPR) was more hawkish than expected, highlighting the Board's move towards a 'neutral' bias.
Bank of Japan kept its interest rate unchanged at -0.1%. At the same time, the central bank announced that it is ceasing their duration targets when acquiring government bonds in the QE operations.
Norwegian HY funds saw a net inflow of NOK7m in August compared to a net net inflow of NOK239m in July. IG funds had net inflow of NOK434m in August, down from NOK3.7bn inflows in July. Although we expected to see a stronger net inflow in the HY funds, the overall reading is positive and underlines the fact that Norwegian credit funds are not facing any selling pressure.
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