What is the direction of US interest rates in the second half? You must prepare by looking at 'this'

Summary

Deputy Director Boo-young interprets the latest FOMC as signaling a shift away from pre-emptive rate guidance toward managing financial conditions indirectly. She argues the Fed wants to tighten without raising rates, making corporate bond spreads and bank lending conditions the key metrics to watch. She highlights Oracle’s vulnerable BBB+ rating as a potential catalyst if a downgrade triggers forced selling, especially as hyperscalers ramp up massive bond issuance. She also briefly comments that the recent won strength may be temporary and sustained easing is uncertain.

• The FOMC under Kevin Warsh (Fed chair) is moving to a 'smaller' central bank, reducing forward guidance and focusing on data, particularly inflation.
• The Fed intends to tighten financial conditions without hiking rates, using tools beyond short-term rates—making credit market conditions critical to monitor.
• Key indicators for tightening are corporate bond spreads (HY OAS) and bank lending standards, rather than just the fed funds rate.
• Hyperscalers (M7) are projected to double their bond issuance in two years, potentially pressuring corporate spreads and funding conditions.
• Oracle (ORCL) at BBB+ faces downgrade risk to high-yield, which could cause forced selling and disrupt the investment-grade bond market.
• The brokerage sector in the US has exposure to these credit dynamics—watching Oracle’s rating event is a practical early signal.
• On currencies, the recent KRW rally to low 1400s is partly due to temporary corporate fx flows and ADR conversions; the speaker is cautious about sustained won strength.