Dysfunction Junction

Dysfunction Junction

Last week's bond selloff puts the spotlight on rates in the week ahead. Although some described a "delayed taper tantrum," I expressed doubt about that characterization. There were a number of factors in play when the move accelerated on Thursday, not least of which was the BOE's hawkish tilt, which came just hours after the Norges Bank hiked rates. It's also likely that some folks took profits on flatteners, after the 5s30s tightened inside of 94bps post-FOMC. "We can talk all we want about i
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6 thoughts on “Dysfunction Junction

  1. Here is the rates connundrum from my perch. When you shift towards tightening, and tapering is tightening, you might expect risk premium levels to head lower, rate hikes in the curve to build, pushed shorter, and some clarity on the eventual duration of the post-taper rate hike cycle. This is all things that point to a flatter curve. As for the steepening argument, post debt-ceiling expansion or suspension supply is coming, which will be considerably higher than QE purchases, which sort of makes a re-run of Q1, when yields went up, also we are entering a period of weaker central bank purchases from seasonality and then it appears as if domestic banks are slowing their purchases which adds up to a situation where the household may sensibly buy the supply but not at the current price. Which theory wins out is going to be intersting to watch. On the first point, flattening occured in the previous taper or whenever the Fed takes their foot off the pedal. Personally, I am going with the second “supply” argument, but its a close call. If true, expect higher real yields and a stronger dollar.

  2. “America has no functioning government to speak of, and hasn’t for years.” You got that right. At my age, after watching this charade for the last 40 years, and especially lately, it is clear that most Americans don’t actually want a government at all because any rules these folks might make somehow impinge on everyone’s individual liberty. We have been taken over by the loud “well it’s my right ….” crowd. There no longer is a countervailing “it’s my responsibility …” crowd. Glad I’m closer to the end than to the beginning.

    1. Mr. Lucky, you’re making an argument that these people are just selfish to the point of destruction. And you may be correct. But, I wonder if it’s not that they are hellbent on destruction for “freedom” but rather they just want the government to work for them and only for them. And this is how they think they will achieve it. It’s a fear-based thing…if I am right.

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