Of course I am partially talking my book–no doubt.
BUT the FED made an error that they have made before—they are ending quantitative tightening when the stimulus is least needed.
It’s one thing to lower interest rates at a time when it isn’t called for – and another thing to compound the rate cut effects by adding $10 billion in weekly demand to the government bond market. So instead of continuing to run off the balance sheet when demand is high they stop.
You can bet your bottom dollar that the balance sheet will be needed for quantitative easing when the rest of the globe decides they no longer want our government junk so let’s keep running off those balance sheet assets.
You can see the double barrel effect in the 10 year treasury–now at 1.87% after trading as high as 2.07% on Wednesday.
I realize that there is a concern with the strong dollar–but does that mean we are going to chase European negative yields down the rat hole? I guess it does mean that we are going to chase.
I smell a “black swan” event in our NOT distant future–I can’t lay my finger on it (if I could it wouldn’t be a black swan), but it seems like it is closer rather than further out.