Last Thursday, after the US bond yield curve experienced another “upside down”, at 2:50 on May 14th, the 10-year US bond yield fell to 2.4121%, and the 30-year US bond yield also fell. To 2.8485%, it shows signs of risk aversion and economic recession.
According to a Reuters report on May 14, John, one of the Fed’s top policy makersWilliamsSaid, "all over the worldcurrencyPolicy makers should review their strategies to increase their economiesLong andlowinterest rateget ready. ”
The worst "May fell"
On Monday, the three major US stock indexes closed sharply lower. The S&P closed down 2.41% to 2,281.87 points, and the Dow fell 2.38% to 25,324.99 points, the most tragic "May fall" in the past 50 years. andNasdaqThe composite index also fell 3.41% to 7647.02 points, the biggest one-day drop since January 3 this year, and the worst "May fall" in the past 20 years.
Julian Emanuel, head of US equity and derivatives strategy at BTIG, pointed out, "We do believe that interest rate cuts will become a means of stabilizing the stock market and expect the stock market to rebound to 3,000 points after the rate cut." "There should be two this year." After the interest rate cut, the stock will continue to sell, but then it will stabilize and rise."
In addition, the bond market also showed strong hedging signals.
Although there has been controversy about the “backup” of the US bond yield curve on the “what is the most reliable” issue, the overall reliability of the yield curve is still trustworthy. According to Bloomberg News, in the view of the Fed and the president’s chief economic adviser Larry Kudlow, the “reversal” of the 3-month and 10-year US bond yield curves is the key “economic barometer”.
The three-month and 10-year US Treasury yield curves, which had returned to the plains last month, reappeared “downside” at 16:22 on May 9th.
In this regard, Gluskin Sheff chief economist David Rosenberg pointed out, "I think we are falling into recession because people often forget that with monetary tightening policyGDPCompared with the impact of growth, the monetary policy tightening cycle itself will have a certain lag. ”
Is the probability of a rate cut in December 100%?
Since the United States has maintained its benchmark since December last yearinterest rateUnchanged, the US president kept calling for the Fed to cut interest rates to stimulate the economy. Fed officials predict that no interest rate adjustment measures will be taken this year, but they are also worried about low inflation and global economic growth.
With the warming of global trade tensions last week, US traders said that “the possibility of the Fed’s interest rate cut is rising”, but the reason for the central bank’s interest rate cut is different.
As of 16:30 pm local time on May 13th, NetWest Markets data showed that due to the US federalfundInterest rate futures prices suggest that the probability of the Fed cutting interest rates by 25 basis points in December will reach 100%. The market expects the Fed to cut interest rates by 25 basis points this year to 60%, and even expects to cut interest rates in September this year by 60%.
It is worth noting that the market expects that the Fed will reduce interest rates by 25 basis points in December this year by 80%, and by the end of next year, the market is expected to cut interest rates twice.
John Briggs, head of strategy at NetWest Markets, said, "We have predicted that the Fed will not take any action by 2020, but the risk balance indicator strongly points to a rate cut instead of a rate hike. In addition, the bond market also believes that the Fed this year You must leave the 'wait and see' and start 'reducing interest rates'."
It seems that the market and the Fed’s forecast are exactly the opposite. But as the saying goes, "buy expectations, sell facts." Wall Street elites always like to "expect" the probability and magnitude of the Fed's interest rate hikes and interest rate cuts. If the "facts" really happen, they will have no value.
More notably, according to CNBC’s report on May 14, the New York FedbankJohnWilliamsPoint out that central banks must increase their economiesLong andPreparing for low interest rates and stressing that “there is limited space for policy cuts during the future recession, and the economic recovery will be very slow. The market’s expectation of low inflation in the future will not only drag down current inflation, but also reduce the available policy space.”
(Article source: International Finance News)