Operating at the Intersection of Technology and the Capital Markets
Tag: QT
During the week ended September 28th, the Fed reduced its Treasury security holdings by approximately $2.1 billion and reduced its Government Agency security holdings by approximately $16.7 billion. Recall the Fed stated that it would reduce its Treasury holdings by up to $60 billion and reduce its Government Agency holdings by up to $35 billion … Continue reading QT Lite
The Bank of England will likely institute an emergency rate hike of 25-50 BPS today in our opinion as the Pound plummets against the USD (FX Headwinds Will Persist Into 2023). What is fascinating is that the fiscal side loosened policy last week as U.K. Prime Minister Liz Truss pushed tax cuts. Conversely, the monetary … Continue reading The U.K. Is Not In An Enviable Position
The Fed was to have achieved a $95 billion per month Balance Sheet reduction run rate by September ($60 billion of Treasury securities and $35 billion of mortgage-backed securities). The culling of $60 billion in Treasuries per month is going to be difficult to execute. The Treasury market lacks liquidity as evidenced by the sharp … Continue reading $95 Billion Per Month In QT Is A High Bar
If the Fed raises by 100 BPS tomorrow we believe there is another 10% downside to the NASDAQ before October earnings. We believe the NASDAQ will continue to work lower as the Fed hikes its Fed Funds Rate and as Treasury yields climb. We expect the Fed's rate hiking will stop by early next year … Continue reading A NASDAQ Bottom. QT Or Not To QT?
We have frequently written over the past few weeks that the Fed ought to increase its Fed Funds Target Range by 100 BPS to 3.25-3.50% on Wednesday at 2:00pm during its FOMC meeting. The 2-Year Treasury yield (a Fed barometer) sits at 3.95% and the Fed ought to be a fast follower of the 2-Year … Continue reading We Prefer QT To Fed Funds Hikes
We detail changes in the Fed's Balance Sheet since May 2022 as the Fed has embarked on its QT program (which has yet to kick into high gear). QT ramps up this month. Approximately $92 billion of Treasury securities have been pared from the Fed's Balance Sheet since May 4th 2022.Approximately $6 billion of Government … Continue reading How The Fed’s Balance Sheet Has Changed
Once the Fed fully ramps its QT effort logic suggests that Treasury yields will climb higher as it is unlikely that a buyer(s) exist to offset the Fed's Balance Sheet runoff. Thus, Treasury prices are likely to fall and yields will climb. Risk assets are likely to decline in value during this QT period. The … Continue reading QT Has Yet To Kick In Yet Yields Have Moved
When may this occur? Don't hold your breath. Investors' obsession with interest rates will likely persist until the market finds a bottom. It is unlikely that equity markets will find a bottom while the Fed is tightening monetary policy. We saw the NASDAQ Composite recover in October 2019 as the Fed became more accommodative. We … Continue reading A Return To Fundamental Investing
The Cleveland Fed's current August year-over-year CPI estimate is 8.3%, down 0.2% from July's 8.5% level. The bank estimates August Core CPI at 6.3%, up from July's 5.9% level (while oil prices have fallen, food prices continue to rise). We quote the Cleveland Fed as the bank's view on CPI and Core CPI is in-line … Continue reading August CPI To Remain Robust
So much for the Fed trimming its Balance Sheet by $95 billion per month. The Fed has expanded its asset base during the month of August. Fed assets stood at $8.9 trillion as of Wednesday August 10th. It is difficult to allocate this Federal Reserve any credibility as it relates to mitigating price inflation or … Continue reading QT or QE?
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