Another odd and volatile day in US markets
The minutes of the Fed’s last meeting reflected a feisty central bank committed to rate increases.
(“Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the committee to adjust the stance of policy as warranted,” the minutes said.)
Treasury yields duly rose.
Stocks, for some reason, rose sharply too — not at all what we would have expected in response to Volckery noises — before giving up most of their gains at the close.
Markets are weird, and weirder than usual just now
Robert Armstrong, FT US Financial Commentator July 7, 2022
Världen över har centralbanker tagit i med ovanligt stora räntehöjningar för att bromsa inflationen.
Riksbankens höjde styrräntan med 50 punkter till 0,75 procent och fler höjningar är att vänta. I början av nästa år väntas en styrränta på nära 2 procent.
(NÄRA 2 PROCENT !)
Louis Landeman, chef för kreditanalys på Danske bank
– Det är en av de allvarliga situationerna, eller kriserna, som vi har varit med om på lång tid.
Flera av de större fastighetsbolagens obligationer handlas just nu med räntor på hela 5–10 procent vilket är avsevärt högre nivåer än tidigare i år.
Louise Andrén Meiton SvD 5 juli 2022
https://www.svd.se/a/eE3EAO/fastighetsbolag-pressas-av-stigande-rantor
De stigande räntorna är bara tillfälliga. Det tror Sven-Olof Johansson.
Snart måste centralbankerna stötta ekonomin genom att sänka sina styrräntor och stödköpa värdepapper igen, spår han.
– Konjunkturnedgången kom mycket snabbare än många trodde. Centralbankerna hinner inte komma igång med räntehöjningar och likviditetsindragningar, för snart är det dags för stimulanser igen.
Efterfrågan i ekonomin avtar snabbt när konsumtionsutrymmet minskar eftersom mat, energi, resor och boende har gått upp i pris, säger han och lutar sig tillbaka i soffan.
Birgitta Forsberg SvD 5 juli 2022
https://www.svd.se/a/Kzo3Q5/fastighetsnestorn-sven-olof-johansson-rantorna-faller-snart-igen
After the Fed Funds rate reaches its current market-expected peak of 3.39% in February 2023, investors expect the central bank will start cutting interest rates again, which would be tantamount to declaring “victory” over inflation.
But will such a brief stretch of tighter policy be enough to help defeat inflation?
Right now, markets expect that in “real” terms — that is, when adjusted for inflation — the Fed Funds rate won’t reach positive territory at any point during this tightening cycle.
MarketWatch 5 July 2022
https://englundmacro.blogspot.com/2022/07/markets-underestimating-how-far-fed.html
It’s my job to make sense of markets, and I do it gladly.
It can be fascinating. The problem is that this implies that there is some sense in what markets are doing. At times like this, such a belief grows much harder to sustain.
Let’s start with the behavior of the two-year Treasury yield, one of the most important building blocks of global finance In the space of a month, two-year rates went from 2.7% to 3.4% and back again — and in the last 24 hours, they’ve made it back to 3%. Somersaults like this are just not normal.
Minutes to the Federal Open Market Committee’s June meeting with sentiment taking hold that the Fed would soon have to reverse course, there had been hopes that the fine print would reveal “get-out” clauses to provide an excuse not to hike rates too much. They weren’t there.
Fed’s priority now is to regain lost credibility and bring inflation expectations under control. Retreat without doing this and they evidently think that there could be further damage to the economy.
None of this should have come as a nasty shock for anyone paying attention.
John Authers 7 juli 2022
We are facing the starkest trade-off between inflation and growth since the early 1980s.
Central banks will have to crush the economy to kill inflation. Or we might be forced to live with more inflation.
This is not a trivial choice.
Jean Boivin FT 4 July 2022
https://englundmacro.blogspot.com/2022/07/the-problem-many-central-banks-are.html
The view that a weakening economy will undercut inflation — but that the recession, should there be one, will be mild.
Markets have told this story, with increasing fervour, for weeks now. Let us all hope that things go so smoothly.
If the inflation data fail to co-operate, the disillusionment will be nasty.
Robert Armstrong, FT US Financial Commentator 6 July 2022
The next bond market selloff is no more than another bad inflation report away
Jenny Paris Bloomberg 24 juni 2022
https://englundmacro.blogspot.com/2022/06/the-next-bond-market-selloff-is-no-more.html
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