MS: An aggressive tone conveying no limits to policy easing, and corp credit facilities that will be operating “fairly soon” garnered a marginal easing in financial conditions. MS strategists exit 30y bond longs, 7s30s flatteners; remain long 5y BEIs, and bearish USD. MS expect an IOER hike eventually.

• Given that the Fed is not looking to extend duration of its Treasury purchases as MS had expected, they think the risk/reward to be long 30-year bonds, has diminished for now. MS close their long 30-year position, their 7s30s curve flattener, and suggest moving to a neutral stance on Treasuries across the curve. MS also suggest switching 2s30s swap spread steepeners to 2y swap spread wideners. They continue to suggest being long 5-year breakevens.

• MS think Treasury yields are unlikely to lift meaningfully higher in the near term, as the Fed has placed a glass ceiling on the level of yields by suggesting it remains ready to act on their QE program if needed.

• MS were somewhat surprised that the Fed did not adjust IOER higher by Sbp, given that EFFR has set at 4bp three of the last four days. As reserves continue to grow, MS would expect EFFR to continue to drift lower. Ultimately, the Fed may have to make this adjustment at the June meeting (if not earlier).

GS: The April FOMC meeting was largely uneventful and in line with our n expectations. The FOMC did not make changes to IOER, the forward guidance, the asset purchase plan, or the credit facilities. Pressed on the forward guidance, Chair Powell said that “we’re not going to be in any hurry to move rates up” and noted that market pricing implies no change for “a good while, and that is appropriate.”

– Powell noted that the new Fed credit facilities have already catalyzed private lending, that the Fed intends to use its emergency lending powers “forcefully, proactively, and aggressively,” and that the facilities will not run out of funding. He said that the corporate credit facilities will be operating soon and that the Fed is close to announcing a new term sheet for the Main Street facility.

– Powell also highlighted the importance of avoiding unnecessary insolvencies to n prevent damage to the economy. He acknowledged that some borrowers for whom “getting a loan that may be difficult to repay may not be the answer” might need direct fiscal support, and noted that while the Fed does not have that power, “there may be a need for those authorities to be used as well as ours.”

Citi- Bottom line: the April FOMC meeting was broadly in line with expectations, but marginally dovish. Chair Powell stressed that the Fed would continue to act ‘forcefully, proactively and aggressively’ until the recovery was well under way and that it was prepared to do more, if needed, ‘to the limit of its powers: Chair Powell said the Fed was in no hurry to remove accommodation and expectedly did not provide any detail on exiting asset purchases or its lending operations or yield caps or forward guidance. The Fed unexpectedly did not hike IOER, perhaps as it preferred to await the effects of large upcoming Treasury issuance.

– Citi don’t expect major new Fed easing measures in the near-term, even though there is scope for some tweaks and several facilities are not yet operational. In the near-term, the Fed meeting supports risk assets and adds to the USD headwinds as funding conditions and risk sentiment still normalize, but Citi remain constructive on the USD outlook more broadly, including as they think that US growth will recover more quickly than elsewhere

NWM: Two areas of particular interest coming into the meeting concerned forward guidance and a schedule for QE. Nothing formal was announced on either front. With respect to forward guidance, the statement (and Powell’s comments during the Q&A) were unchanged: “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” With respect to announcing a specific quantitative easing program, Powell said, “That is not something we are doing today. It’s something that we have talked about, and for now, we like our current policy stance.” Note: NWM US strategy team still thinks the Fed will end up reducing Treasury purchases to —$100bn a month (versus this week’s pace which implies a monthly pace of —$210bn a month). However, by keeping the weekly process intact, the path to that level will likely be slower and smoother than if the shift had been announced today.