K. Warsh 1st FOMC Unambiguously Hawkish

The FOMC, under new Chair K. Warsh, delivered an unambiguously hawkish message, leading to a sharp rise in short-term U.S. yields and a stronger dollar. Equities fell, and credit markets saw specific sector stress in the automotive space following a BMW profit warning.

Key Takeaways

• 1.The first FOMC meeting under new Chair K. Warsh resulted in a hawkish shift with no forward guidance, raising inflation concerns and shifting rate hike expectations.
• 2.U.S. yield curves reacted sharply, with the 2-year Treasury note yield rising 15 bps, while the DXY dollar index climbed above 100.
• 3.Automotive sector credit spreads widened significantly following a profit warning from BMW, affecting both senior and hybrid debt.

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