Operating at the Intersection of Technology and the Capital Markets
Tag: QT
Eventually fixed income traders will wish to be compensated for the growing risk in the real economy, pushing yields higher. Dovish forecasts from the Fed will carry less weight with this investor cohort as economic reality sets in. Fed balance sheet reduction = higher yields. Investors would be wise to remember that the Fed is … Continue reading Yields Will Move Higher
Too many bulge bracket firms are dismissing the chance of a 75 basis point increase by the Fed tomorrow. Variance of expectations means greater potential for volatility (i.e. downside risk). Over the weekend we stated that we believe there is a 50% probability that the Fed will raise its Fed Funds Rate by 75 basis … Continue reading Wednesday Could Get Bloody for Equities
Powell was confirmed for a second term as Fed Chair on May 12th. His nomination was held up for months in the Senate. Powell's confirmation will provide him with temporary courage - enough to talk in a hawkish manner, enough to take the Fed Funds Rate to 2% by summer's end - but not enough … Continue reading Jerome Powell Will Talk Tough This Summer
We expect a 50 basis point increase in the Fed Funds rate tomorrow. More importantly over the next number of months will be the Fed's actions with respect to its balance sheet. Our focus will be on the Fed's balance sheet over the next number of months (see chart below), which has ticked down recently … Continue reading Tomorrow’s Fed Decision
10-year Treasury yields sit around 2.72% and will climb higher as the Fed: a.) lifts the Fed Funds Rate and, b.) trims its balance sheet (i.e. quantitative tightening "QT"). There is no scenario in which the Fed executes QT only to have Treasury yields move lower. It is simply a question of supply and demand. … Continue reading Treasury Yields Will Only Move In One Direction
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