Note: The Effective Fed Funds Rate of 1.090 is my guess. The New York Fed will post it tomorrow.
This morning I commented Fed Makes Surprise Inter-Meeting 50 Basis Point Rate Cut.
Strong inversions and Fed Fund Futures were the key to understanding why the Fed would jump 50 basis points.
Guess what. Even after that emergency inter-meeting cut, the yield curve is still inverted.
The Fed is under pressure to cut again.
Mike “Mish” Shedlock
Well, the Fed resisted Wall Street demands to cut this long, unfortunately they knew that old black swan would come swimming along someday. It finally did and it goes by the name Coronavirus. The real problem is that once the emergency action is taken in response to that black swan it will be just as impossible to unwind as it proved to be when they tried to unwind their balance sheet. So when the virus is no longer seen to be a threat and they try to raise rates back to normal every speck of fecal matereial in the financial world will hit the fan at the same time. Like a Chinese finger puzzle, you can go deeper in but never pull out. Not without a lot of blood and pain and they have shown they simply will not let that happen. My bet is because it is at root wealth inequality and any fix will mean the wealthy get just hammered. This version of capitalism is so broken it is not even capitalism anymore. No attempt to repair it can possibly work. They will have to scrap it and rebuild real capitalism, but in doing so they open the door to socialism because the vast majority of Americans are angry and hurting.
Obviously, the Fed is desperate. Yellen played musical chairs and the music didn’t stop. Powell thought he would luck out too. If she blows, it ain’t going to be pretty and Powell doesn’t want to have the Greater Depression on his watch..
Real guns have magazines, the Fed is using a clip now.
Best country on earth. Cutting rates will not create a vaccine, nor will it more quickly produce test kits. These Central Bankers are out of their god**** mind.
A month from now will have 17 test kits, 4 new cases, people dropping dead like flies and a saved stock market. And everyone thinks China is a bunch of liars.
Did someone say something good about China?
What are the central bankers supposed to do? Let the financial system melt down because they refused to lower rates when the market was screaming of the necessity?
That’s probably the end game, but at least it would be a bit prudent to try and delay as much as they can.
Melt down? It was down 10%. Not sure how old you are, but back in the days, it’s called a correction. Sure it came fast and thick, but the market’s elevated anyways. Tesla at 900. Sure.
Also have you ever thought? If low rates can cure ANYTHING, why bother increasing interest rates? If all you have is a hammer, everything looks like a nail.
Actually, yes. Recessions are the cure for the excess in the economy. they have already been delaying for a year. Times up.
Delaying a year? They should have allowed the GFC to run it’s course in 2008 rather than bail out the banks at the expense of homeowner equity and 5 million foreclosures. Because they did not and have taken one emergency action after another to prop up the corrupt system we STILL HAVE NOT GONE THROUGH THE CLEANSING FIRE OF A REAL RECESSION/DEPRESSION! And there is no suspending of black letter economic law, all they are doing is heaping more and more shit on top of the existing leaning tower of crap till one day it will collapse. The only way out from under this historic fraud and the historic consequences we are going to have to live with is if science takes a leap forward with unprecedented advances like true FREE energy. But, even a giant leap in productivity from something like that would still require a fundamental change in the division and distribution of wealth and income.
They are irrelevant and have lost all credibilty. A worldwide confederecy of dunces.
They never had any credibility. At least not to anyone not themselves a card carrying member of that “worldwide confederacy of dunces.”
People who can, and do, rob you at will; aren’t irrelevant, though.
Change irrelevant to malevolent,
Unfortunately the Fed can’t print antibodies.
But they can sure as heck print up the costs faced by people competent enough to otherwise have a shot at developing them; in their never ending quest to rob competents for the benefit of the rank idiots which are the only ones who have ever benefited from the existence of a central bank.
Panic ain’t pretty.
DJ-30 nearly down 1000 points at close. Even the PPT could not stop the panic… Market still overvalued however. DJ-30 to 20k, first stop. Watch “China new Covid-19 cases” on the John Hopkins tracker, it’s the metric that moves the market IMO.
30yr < 1.60
It’s like watching your “money” become worthless in real-time.
I put my wallet where my mouth is.
For years my core position has been treasury STRIPS.
Holding them till 30yr yield @ +50bps.
I guess it was your tip on here I picked up on a few years ago, so “thank you” is in order. The 30T strips are my best buy. Nearly touched 1.5% today, unreal. Of course, I might still screw up the sell! … No way I’m waiting until 50bps though. I fear govs and CB’s are going to be deep into radical territory by then, changing the laws of market physics such that only the 0.01% come out on top.
Radical, indeed.
But the Federal Reserve’s playbook so predictable. Interest rate cuts followed / in conjunction with balance sheet expansion. $10 trillion balance sheet always in the cards when next crisis hit. As for low rates. They’ll go lower. A lot lower. German and Japan 10 yr ALREADY with negative yield. Only a matter of time before Treasury 10yr joins. Spread between 10yr and 30yr ~ 50 bps. When 10yr hits 0%, I’m out.
The deflation that they are all expecting because no one will be going out to buy anything will make any return a bonus… not.
I suppose investors might be chasing a rally in treasury prices, or are they just fleeing stocks ?
You were always bullish the dollar, so the move to question it now I take as sincere.
(I don’t invest, I just follow what goes on)
.999 on 10yr
0.989 and still dropping.
Wow.
Surprise and panic in the front runners….
For those who follow candlesticks charting, the market, in response to the rate cut, has formed dark cloud cover, indicating a reversal to the downside (if confirmed tomorrow).
The future actions of the FED will mirror what happens with the DOW. I doubt the FED cares about inversion right now.
1.007% right now on the 10-year, and the stock market doesn’t seem to like it.
Getting serious now.
One bag of popcorn serious? Or two?
HA! Two bags of popcorn? Who is your mortgage broker for that? Judging by the markup for popcorn either the healthcare insurance lobby or Columbian drug lords are pricing that shit. Or I suppose the Fed and ECB.
“With the yield curve still inverted, the Fed will be under pressure to cut again.”
…
Mr Market knows exactly how many interest rate bullets the Federal Reserve has left.
The FR will still fire them, but to no avail.