Tag: Treasury yields

The U.K., The U.S., Inflation & Real Yields

The U.K., The U.S., Inflation & Real Yields

The Bank of England stepped into the bond market, agreeing to purchase Government long bonds until October 14th. The BoE plans to restart its Government bond sale program on October 31st (the central bank plans to sell GBP 80 billion of bonds each year as part of its tightening process). How did the U.K. find … Continue reading The U.K., The U.S., Inflation & Real Yields

$95 Billion Per Month In QT Is A High Bar

$95 Billion Per Month In QT Is A High Bar

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

A NASDAQ Bottom. QT Or Not To QT?

A NASDAQ Bottom. QT Or Not To QT?

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?

QT Has Yet To Kick In Yet Yields Have Moved

QT Has Yet To Kick In Yet Yields Have Moved

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

China Is Easing

China Is Easing

China is cutting rates again in an effort to bolster the local economy which has slowed due to COVID lockdowns and the bursting of the local property bubble. We touch on a few near-term implications of this slowdown. More importantly, from a strategic perspective China's easing will likely result in the U.S. expanding its trade … Continue reading China Is Easing

Yield Curve Inversion Implies Near-Term Risk

Yield Curve Inversion Implies Near-Term Risk

The Treasury yield curve continued to invert as short rates climbed higher and long rates fell. The 1-Year climbed to 3.14%, the 2-Year rose to 3.10% while the 7, 10, 20 and 30-Year Treasury yields all fell (see table below). The Treasury market is telling us that it expects a near-term recession by way of … Continue reading Yield Curve Inversion Implies Near-Term Risk

The Fed Will Raise By 100 Basis Points In July

The Fed Will Raise By 100 Basis Points In July

Our view is that the Fed will raise the Fed Funds Rate by 100 basis points when it holds its FOMC meeting on July 26th and 27th. Today's CPI print of 9.1% creates significant political and economic pressure for the Fed to become increasingly aggressive in its approach to taming inflation. The Fed is behind … Continue reading The Fed Will Raise By 100 Basis Points In July

CPI Release On Wednesday: Our Thoughts

CPI Release On Wednesday: Our Thoughts

We expect the June CPI figure to come in around 9% when CPI data is released Wednesday at 8:30am ET. What do we expect for a Fed Funds Rate increase?If the CPI comes in at 8.0-8.5%, we expect that the Fed will increase the Fed Funds Rate by 75 basis points at its FOMC meeting … Continue reading CPI Release On Wednesday: Our Thoughts

QT Has Only Just Begun

QT Has Only Just Begun

The Fed's balance sheet declined modestly ending the week at $8.91 trillion, down from $8.93 trillion and up from $8.76 trillion at the beginning of the calendar year and up from $4.17 trillion in January 2020 (just before the unprecedented fiscal and monetary stimulus programs of 2020 and 2021). As we wrote on Tuesday, the … Continue reading QT Has Only Just Begun