A One-Eighty

A One-Eighty

Neel Kashkari is opposed to rate hikes "at least" through 2023, headlines read late Friday. By that time, though, it was too late. Kashkari's "good" cop wasn't enough to offset Jim Bullard's "bad" cop act, which set the tone for an abysmal session on Wall Street. The long-end rallied again, while yields were cheaper at the front-end, flattening the curve further on the heels of Thursday's dramatics. The 5s30s narrowed to the flattest since September and the 2s10s to the tightest since February
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6 thoughts on “A One-Eighty

  1. It appears the bond market may be starting to somewhat price in the FED choking out the “recovery”. Meanwhile, it’s not even a properly a recovery yet, around 15 million people realistically that should be gainfully employed are sitting on the sidelines in one form or another, US banks would rather get 5 bps on reverse repo than lend into the “recovering” real economy, and China’s credit impulse is also negative, but there you have it.

    And I just last week I saw a forecast by a top 10 US bank for more than 7% nominal GDP growth in 2022, and 4.5% real, after higher figures this year. I almost spit out my drink. It seems certain important people are way more convinced President Manchin is prepared to start spending like a drunken sailor than I am. Mind you, 2022 is a midterm year and the GOP only needs one more year of obstructionary, procedural behavior to regain control.

  2. Everything about this 180 is yelling “fade” because this market is gyrating like a caricature of itself, possibly reflecting the fact that all the adults are on vacation and all the software is juvenile…

    I don’t believe deeply negative reals make sense here. But I believe even less the market’s apparent perception that reals are about to turn positive with a 10yr below 1.5 and inflation presumably dropping to zilch. Not happening.

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