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The eyes of the world are on the Fed, First Republic’s rescuers may rely on US backing to reach a deal and UBS offers to buy back bonds. — D [View in browser]( [Bloomberg]( The eyes of the world are on the Fed, First Republic’s rescuers may rely on US backing to reach a deal and UBS offers to buy back bonds.  — [David Goodman]( Fed decision All eyes in the financial and economic world will be laser-focused Wednesday on the Federal Reserve as Chair Jerome Powell tries to balance his fight against inflation against a sudden banking crisis. Powell and his colleagues began their meeting Tuesday with the outcome unusually murky. While most economists [expect a quarter-point interest-rate hike](, some say policymakers should pause to shore up financial stability. Meanwhile, bond traders [lack true conviction]( about the Federal Reserve’s policy intentions for the first time since the central bank’s frenetic tightening cycle began a year ago. First Republic rescue Wall Street leaders and US officials discussing an intervention at First Republic Bank are exploring the [possibility of government backing]( to encourage a deal that would shore up the lender, according to people with knowledge of the situation. The group has floated a variety of measures to make the company more attractive to potential investors or a buyer, part of an effort to ensure there isn’t another US bank failure. UBS offer UBS is [offering to buy back]( 2.75 billion euros ($3 billion) worth of bonds it issued to investors just days before rescuing Credit Suisse. Switzerland’s biggest bank invited holders of its senior unsecured bail-in notes due in March 2028 and March 2032 to tender the securities for cash at their respective re-offer price, citing the “exceptional corporate actions” of March 19. That was the day UBS agreed to buy its rival in a government-brokered deal aimed at containing a financial market selloff sparked by the collapse of Silicon Valley Bank earlier this month. Meanwhile Credit Suisse[was ordered by the Swiss government](to freeze deferred bonuses, adding to the pain of bankers who had already seen the value of their awards decimated by the stock’s plunge. Stocks waver European stocks [fluctuated in a narrow range]( and US equity futures edged lower as investors prepared for the Fed’s decision. Treasury yields fell slightly after a surge on Tuesday that added 19 basis points to the two-year maturity. The [pound strengthened]( after a surprise increase in UK inflation. Coming up… The Fed will announce its decision at 2 p.m. in Washington, followed half an hour later by Powell’s press conference. Before that, the only data concerns mortgage applications. What we’ve been reading Here’s what caught our eye over the past 24 hours: - UK inflation shock upends [BOE bets and gilt market](. - [Brexit and Boris Johnson return]( to test Sunak on crunch day. - JPMorgan says Treasuries coping amid [worst liquidity since 2020](. - Ericsson pleads guilty to breaching US agreement in [bribery case](. - Greece plans to hold general elections in May, [premier says](. - Archegos’s Bill Hwang loses bid to have [charges dismissed](. - At Al Aqsa Mosque, shards of stained glass tell a [story of conflict](. And finally, here’s what Joe’s interested in this morning Good morning, and Happy Fed Day. For the first time in the entire hiking cycle, there appears to be at least a little ambiguity about what Powell & Co. are going to do. While the general expectation is for a 25 bp hike, [markets are only pricing in an 80% chance of that happening](. It's not a lock. In a chat on the [Odd Lots Discord yesterday](, [Skanda Amarnath]( of Employ America predicted that Powell would have his trickiest press conference yet. So it'll be an interesting day, if nothing else. Speaking of the press conference, [yesterday Nick Timiraos posted a study]( showing that market volatility is three times higher during Powell press conferences than during Bernanke or Yellen ones. Some of that may just be due to circumstances though. Neither Yellen nor Bernanke had to deal with inflation or a pandemic. Anyway, I think the thing that continues to strike me is the sheer multiplicity of narratives and regimes in 2023, and we're not even to the end of Q1 yet. But so far we've had at least 5 different phases already: - Recession fears (first few weeks of January) - Soft-landing optimism (late January through mid-February) - The "No Landing"/reheating consensus (mid-February - early March) - Fears of a bank crisis in the US and Europe (early March to yesterday) - Modest optimism that the banking crisis is contained to a few idiosyncratic institutions (yesterday) One way this plays out is just constantly shifting rate expectations, in both directions, leading to a tremendous amount of bond volatility. In fact, bond volatility (as measured by the MOVE Index in yellow) recently surpassed its March 2020 highs. Whereas if you look at the VIX (which measures implied stock market volatility) you'd hardly know that anything interesting was even happening this year. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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