Summing up the anxiety ahead of today's Fed decision - which talking heads just this morning explained is "priced in" and is a "non-event... been so telegraphed" - market professionals believe "it seems a good time just to go and beat the crap out of a punchbag." As Bloomberg reports, real traders say they "just don't want to do any damage today," as they trade around the events, "I think we're going to see a lot of volatility," and Treasury risk is already spiking to 5-month highs.
Despite a baked-in-the-cake 76% probability of a 25bps rate hike, no one knows what the effect of a move in rates will be after such a period of ZIRP and excess monetary policy. With estimates of up to $1 trillion of liquidity withdrawals expected via reverse repo to 'enable' this rate move, as Bloomberg reports,
For Alan Clarke, an economist at Scotiabank in London, there’s nothing like a little simulated violence to calm his pre-Fed jitters.
Bankers worldwide will be hitting gyms, beating the sun up and burning the midnight oil in preparation for the most hotly anticipated Federal Reserve decision in years.
“It seems a good time just to go and beat the crap out of a punchbag,” said Clarke, who plans to spend a few hours at 1Rebel gym before heading back to the office for the announcement.
Still think it will all be calm and priced in? Treasury market volatility has surged to 5-month highs as traders brace...
The statement is scheduled for 2 p.m. in Washington followed by a briefing from Chair Janet Yellen, meaning a late finish in Europe and an early start in Asia for those who need to live it in real time...
“You don’t want to do any damage,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “That’s the biggest risk today, trading in and around these events.”
John Gorman, a Tokyo-based bond trader at Nomura Holdings Inc., one of the 22 primary dealers that trade directly with the U.S. central bank, is setting his alarm for an extra early start so he can be ready for the 4 a.m. showtime.
“I feel like I want to be there for it,” Gorman said. “It’s simply uncharted territory. I think we’re going to see volatility as a result.”
Expected price swings in the dollar against the euro overnight jumped on Wednesday to almost double this year’s average.
Bernard Sin, head of currency and metal trading at MKS (Switzerland) SA in Geneva. “There’s nothing you can do, but sit and wait. A lot of people will be working late this evening.”
* * *
But it's all priced in, so don't worry.