Tag: 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

GDP, Inflation, Yields, Currency & 2023 Earnings

GDP, Inflation, Yields, Currency & 2023 Earnings

Real GDP: If the Atlanta Fed is correct, Q3 will be the third consecutive weak GDP quarter given the bank's Q3 Real GDP estimate of 0.3%, which follows two consecutive negative Real GDP quarters.Inflation: We expect inflation to be sticky when the CPI is reported on October 13th. Core CPI will remain elevated largely due … Continue reading GDP, Inflation, Yields, Currency & 2023 Earnings

Higher Interest Rates & Growth

Higher Interest Rates & Growth

It appears we were correct several weeks ago when we wrote that the Fed will maintain elevated interest rates for longer than markets expect. What are the repercussions for business? A persistently higher interest rate environment will expose hidden zombie companies much like the dry Paluxy River bed in Texas recently exposed dinosaur tracks. However, … Continue reading Higher Interest Rates & Growth

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

Treasury Yields Will Only Move In One Direction

Treasury Yields Will Only Move In One Direction

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

Brace for Anemic Long-Term Real GDP Growth

Brace for Anemic Long-Term Real GDP Growth

The three-headed Hydra of low labor participation, increased debt levels and higher taxes will cripple U.S. long-term Real GDP growth for decades. Labor participation is not going back to December 2019 levels. To believe that scenario is wishful thinking. For starters, 25% of restaurants and bars are permanently closed. Those jobs are not returning. Second, … Continue reading Brace for Anemic Long-Term Real GDP Growth

The Fed’s Next Move Is To Ramp QE, Not Raise Rates.

The Fed’s Next Move Is To Ramp QE, Not Raise Rates.

We have said it on our TEK2day Podcast and in conversations with some of you that the Fed's next move is to accelerate its QE effort to control long bond yields. This may occur as soon as this month. An interest rate hike is not coming this year in our view. There is far too … Continue reading The Fed’s Next Move Is To Ramp QE, Not Raise Rates.