Why Goldman Thinks The Fed Isn’t Even Halfway There
Count JPMorgan among those who aren't particularly concerned with 10Y yields at 3%. We've argued repeatedly over the past week (see here, for instance) that the obsession with the 3% threshold is to a certain extent absurd, although admittedly, when something that's inherently arbitrary becomes a fixation for enough people, there's a self-fulfilling dynamic that kicks in, effectively bestowing undue meaning on something that, in and of itself, is largely meaningless. Yields of course pushed ab
2 thoughts on “Why Goldman Thinks The Fed Isn’t Even Halfway There”
Yes. There should be more concern about short-term rates jumping, such as the 2’s mentioned in this post.
Rising short-term rates crushes the profitability of banks and bank like financials who borrow short and lend long.
Plus much more household and government debt is tied to shorter rates (tho lately gov’t has been trying to extend duration). Stats show household and corporate credit growth falling, probably in response to higher rates on the short end of the curve. If it continues it becomes an early recession indicator approximately on par with an inverting yield curve for reliability as a signal.
But don’t forget that Trump “likes low interest rates” and is in a position to stack the Fed with his choices.