Thanks to Reuters for the photo
It only lasted 3 days. Already the FED are walking back Chair Powell's remarks in the post monetary policy announcement on Wednesday.
On Wednesday Powell stunned markets by following what the markets were telling him to do. Again. In a parallel with the "transitory" policy mistake the FED has admitted it is wrong and the market is right.
And then walking back the comments !
Since the bond market blew up a month ago and USDT hit 5%, we've seen a glut of stealth stimulus via various federal programs producing a stunning drop in bond yields, stock markets at all time highs and a massive increase in retail investors putting savings into one-day options and meme stocks.
Isn't this where we started 550 basis points ago ?
Sure inflation has come down but it's still elevated. What happened to the determination to keep rates high until inflation hits the much-mentioned 2% target ?
Markets don't forget the "transitory" inflation bet or the score of other policy failures. Not wanting to get the markets offside the FED has followed market predictions to the T and they're doing so again. It's massive gamble that with financial conditions already loose, stock markets at all time highs and pretty much the bubble of everything, that this move won't reignite inflation.
And it's been a remarkable turnaround in communication.
However the markets are smelling a rat. Either the FED knows of a economic smash coming (they can't because they're "data dependent") or there's another game afoot.
Crazy drop in 10 year yield in a month, from where something broke at 5%.
And Treasury Secretary Yellen has been on the wires all week talking inflation down.
Maybe the massive rally in US bond markets is actually investors front running more Quantitative Easing or even Yield Curve Control.
Currently the US is paying US$1T per year on on interest on debt. Above 5% in UST10 the debt costs gets literally out of control.
Now it's all about controlling long end rates as well as short term rates.
Back where things really matter, we've seen a rapid decline in the FED Reverse Repo Facility. All the excess cash is going into Treasury Bills, so far it's down to US$680B now down from US$2.3T at it's peak.
This week saw auctions of 10 year and 30 year coupons
Strong Buyside Demand For 10Y Auction Despite Big Tail [Zerohedge]
Treasury’s $21 billion 30-year auction is met with fair demand, trader says [Market Watch]
Positive commentary reflects a sigh of relief for primary dealers who weren't left with a big portion of the auction unlike last month's disaster.
China Injects Most Short-Term Cash Into Banking System on Record [Bloomberg]
They're still spending, increasingly using credit cards and BNPL facilities.
COSTCO SOLD A $100 MILLION WORTH OF ONE-OUNCE GOLD BARS IN ITS LATEST QUARTER [X]
Thanks to Bloomberg Television
BoJ's monetary policy meeting next week (19th) gives them an unusual opportunity to get rid of easy money policy and hit USD / JPY when it's weak. Assuming that that's what they want to do of course.
US CPI getting lower but still too high.
Producer prices heading lower still
Argentina’s new government halves value of peso and cuts spending to jolt economy [FT}
Business insolvencies, loan failures loom and the pain is likely to intensify The Australian