PIPELINE: Corporate Bond Update: $1.6B Dominican Republic 10Y Launched

A survey from AP-NORC has found that pessimism among Republicans about the direction of the country has spiked for the first time since President Trump’s second inauguration. “In June, 29% of Republicans said the country was heading in the wrong direction. That number is now 51%.”

• AP notes, “Among Republicans, there are notable differences by age and gender: those under 45 are more likely than older Republicans (61% vs 43%) to say the country is off track, and Republican women are more likely than men (60% vs 43%) to share that view.
• AP adds, “Views on Donald Trump’s handling of the issues are highly partisan. Trump’s best issues are border security (55% approve) and crime (46%). Roughly 4 in 10 approve of his handling of health care, trade, the economy, the conflict between the Israelis and Palestinians, foreign policy, and immigration. Overall, 39% of adults approve of the way Trump is handing his job as president and 60% disapprove.”
• Silver Bulletin notes that while "Trump’s overall approval rating looks about the same today as it did in mid-July, his approval on issues related to the economy has fallen more consistently."
• Silver Bulletin's Eli McKown-Dawson notes, "approval of how Trump is handling inflation has fallen so rapidly that I've had to extend the y-axis on our issue approval chart below -30." 

Figure 1: “Generally speaking, would you say things in this country are heading in the…?” (% saying wrong direction)

Source: AP-NORC

RRP usage drifts up to $11.173B with 15 counterparties this afternoon from $11.363B Friday - lowest levels since early April 2021. Compared to this year's high usage of $460.731B occurred on June 30.

New Fed Governor Miran unsurprisingly argues for significantly lower policy interest rates in his first prepared remarks (link) since being appointed to the Board, calling current rates "very restrictive".

• The central basis of his argument is that the neutral rate has shifted lower, making immediate easing appropriate: "Because many r* estimates are based on empirical models requiring a great deal of time-series data, they can be backward-looking and slow to adjust. Moving too slowly to update a rapidly changing neutral rate raises the risk of policy mistakes....In my view, insufficiently accounting for the strong downward pressure on the neutral rate resulting from changes in border and fiscal policies is leading some to believe policy is less restrictive than it actually is."
• He goes through various facets of this shift in the neutral rate, citing "nonmonetary factors—such as shifts in border and tax policy, trade renegotiation, and regulatory dynamics—that can have substantial effects on the appropriate setting for monetary policy". He also notes expectations for further declines in housing inflation, and for downward pressure on the output gap as a result of governmental policy changes.
• He applies his estimates to the Taylor rule to estimate where appropriate policy is now, judging that inflation, the neutral rate of interest, and the output gap all point to lower rates being necessitated.
• His "general ballpark" estimate: "I believe the appropriate fed funds rate is in the mid-2 percent area, almost 2 percentage points lower than current policy. The Federal Reserve has been entrusted with the important goal of promoting price stability for the good of all American households and businesses, and I am committed to bringing inflation sustainably back to 2 percent. However, leaving policy restrictive by such a large degree brings significant risks for the Fed's employment mandate."
• He says in Q&A after the speech: "If you keep policy this degree of restrictive for too long, you're not  going to allow things to move in the other direction. And so you're going to create a situation in which an output gap expands. And so in my opinion, it's imperative that we get closer to neutral quickly. And so I thought three, sort of a series of 50s [bp cuts] to recalibrate interest rates was the appropriate policy."
• Getting back to his September Dot Plot submission, Miran answering questions after the speech appears to see 1 more 25bp cut in 2026 and 1 more in 2027 based on the Dot Plot (after getting rates down to 2.75-3.00% by end-2025 per the Dot Plot), to 2.25-2.50%. That's the lowest dot throughout.
• He also says in Q&A that he penciled in GDP growth in the mid-2% area under his rate forecast - if so, he is one of the biggest growth optimists: In the September SEP, the two highest 2026 GDP projections (of 19) were 1 at 2.4-2.5%, and 1 at 2.6-2.7%. (The median was 1.8%).