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28-06-2022, 07:05 PM
(This post was last modified: 28-06-2022, 07:08 PM by specuvestor.)
European bond spreads are widening dangerously that ECB has to keep buying bonds. Similarly in US it cannot be too drastic and collapse the long end of the market which lies the US mortgage loans. So it's a fine balance. And sometimes we forget that we don't really have experience before in QT
https://www.barrons.com/articles/europea...1655278449
https://think.ing.com/snaps/ecb-reacts-t...d-widening
(28-06-2022, 04:16 PM)CY09 Wrote: In my view, an aggressive QT will do the trick. Currently QT is kept a slow pace of $95 billion per month on the back of a $8 trillion balance sheet. Doubling the rate will dampen the housing market and decrease the money supply
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
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29-07-2022, 11:18 AM
(This post was last modified: 29-07-2022, 11:41 AM by specuvestor.)
Bearish if CPI is 5-6% end of the year. How full is your glass
Looks like it will be 50bp hike in Sept and 25bp in Nov vs my hope of 50 in July and 25 in Sep for soft landing scenario. Mild recession in 2Q or 3Q should be expected now rather than soft landing. CPI will be below 2% by then. Million dollar question is whether market forecasts this 12 months ahead with the 20-33% decline
(Bloomberg) -- Two bond market giants are diverging on whether the Federal Reserve is doing enough to tame inflation in the aftermath of the central bank’s interest-rate increase on Wednesday.
In one corner, there’s Scott Minerd, the chief investment officer of Guggenheim Partners, which oversees more than $325 billion. He said the Fed’s guidance that it will likely move more slowly through the rest of the year won’t help bring down price growth. He sees inflation ending at still-hot levels this year at between 5% and 6% -- well above the central bank’s target.
DoubleLine Capital CIO Jeffrey Gundlach, by contrast, said this week’s unanimous decision to raise its benchmark lending rate by another 75 basis points means the Fed is no longer “behind the curve.”
(28-06-2022, 01:13 PM)specuvestor Wrote: ^^ I think it will trend towards 5% by year end but will it be 5.1% or 5.9% I'm not sure. I try to be roughly right than precisely wrong. Inflation is a lagging indicator: the conundrum of low inflation despite QE has come roaring back with Biden's fiscal package when supply chain was tight. this >8% has roots a year ago. PS on gold context do note that Bretton Wood ended in 1971.
I don't think we will go QT again within next 12 months but Burry's view is inline with what I'm thinking as well. If Fed is credible I suspect they should pause or reduce to 25bp hike by September. Powell doesn't have a good track record though
https://www.investing.com/news/stock-mar...SI-2841333
(27-06-2022, 04:12 PM)specuvestor Wrote: Market corrected sharply on 75bp hike and if July Fed hikes 50bp, market will already be relieved, but still an uphill as we stare at 2Q23 recession.
Freight rates and hard commodity are already coming off. Watch 29th June PCE and June CPI numbers that if it comes off the central thesis remains, except no idea whether Fed will gen-chiong even with CPI trending towards 5% by end of year.
(13-05-2022, 12:50 PM)specuvestor Wrote: US inflation is likely to peak YoY in 2Q22 because of the higher base in 2021 with Powell's famous Transient comment... Market is already looking to Fed hiking 50bp in June and July so recession coming in 2Q23. That's probably baked in by the markets. That's like 200bp hike within 6 months plus QT. Compare that with BoE 4 hikes that started in Dec21 with the FTSE relatively flat (excluding GBP depreciation) and we can see how Powell lost the script AGAIN
The concern is whether they will hike 50bp again in Sept or 75bp prior as Fed might be concerned of CPI sticky at 2-5% even as CPI likely to trend towards 5% by Dec 2022. If Fed hikes 25bp or stay in Sept and decided to wait and see I think markets will be relieved. But I'm concern about how clueless Powell can be.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
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