Investors in the credit market are watching for a pivot from the Federal Reserve

(Bloomberg) — Credit watchers are looking ahead to next week’s Federal Open Market Committee meeting, where Federal Reserve Chairman Jerome Powell is expected to announce a 50 basis point hike.

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Such a move would mark a departure from a streak of 75 basis point hikes this year to help tame inflation. Primary US corporate credit markets are largely stagnant heading into the interest rate decision. The bureaus of the high-grade syndicates expect weekly sales to not exceed $5 billion, and it is very possible that there will be no issuance at all.

Things are just as sleepy in leveraged financial markets. The junk bond pipeline ended after equipment maker Chart Industries sold junk for $1.97 billion as part of a $3.4 billion speculative debt deal to support an acquisition. There are no bank meetings scheduled in the US leveraged loan market. At least three loans are being committed next week, and there are a number of deals in the market that are overdue.

The market is on high alert for signs of the Fed moving toward lower interest rate hikes. Sentiment eased slightly after Labor Department data showed on Friday that inflation rose more than expected last month. Investors are looking ahead to next year, expecting a pause in rate hikes. But with inflation still too high and a strong labor market, it may be difficult to get a clearer picture of the Fed’s path through 2023.

The latest batch of CPI data will also be released on Tuesday, adding new data for the Fed to consider.

“Close attention will be paid to the FOMC for any signals of a future rate hike and expectations for terminal rates given the mixed data recently,” Barclays strategists Bradley Rogoff and Dominique Tublan wrote in a note on Friday. The bank said a 50 basis point hike next week was “almost certain”.

December is typically a slower month for issuance as syndicate desks close deals before the holidays. But this year has been especially slow. Sales of investment-grade corporate bonds, for example, are shaping up to be the slowest December in at least 15 years.

ADVISORY: The upcoming US Credit Week will be replaced starting December 17 with Global Credit Weekly, where Bloomberg’s team of reporters around the world will catch up with you on the week’s hottest stories and offer you a peek at what’s ahead to happen.

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