So we are all looking for a Federal Reserve tapering announcement in early November likely stating the intention to reduce their purchases of treasury securities and mortgage backed securities starting in December (likely) by $15 billion.
EVERYBODY knows this is the plan–unless you have been under a rock for the last 3 months.
So what is happening in the bond market? Values are moving higher with yields moving lower–at this moment the 10 year treasury stands at 1.51% which is 10-11 basis points below where it was 3-4 days ago. Trying to figure out the details of these movements is simply not possible–the trend for the next 6 months might be ‘guessable’, but forecasting (guessing) is just not possible, but the talking heads on the tube spend hours and hours blabbing about it–hey they have to since they have so much air time to fill.
Over time rates will move higher, but right now the amount of investable cash laying around is massive–still the $5 trillion in money market accounts–would be surprised to see rates spike too much until folks either spend or invest this ‘dry powder’.
Taper is completely negated by less Treasury issuance, at least for now.
In the last taper tantrum, rates actually topped when the taper started— sell the news reaction.
That said, growth is likely to accelerate in Q4 and that should exert upward pressure on rates. I think Q4 will see stock and bond markets similar to Q1 when growth and inflation were also accelerating. Q1 2022 could be a different story.
I’m looking for a true correction, probably in the second half of 2022. Until then full steam ahead.
Wondering if sandbox and reader initiated alerts are down. I am not noticing any new postings to them?
I figured it out—my error.
Hi randy–I fixed the issue you refer to–having to go to the bottom of the page. It makes you go to the bottom after 500 comments so I need to refresh them occasionally.
The market has already priced in a token taper and everybody knows its all talk, very little action.
So far rates movement is pretty logical. 10 year rate went up on inflation concerns and possibility of 3.5 T economic package . Rates started to decline with assumption that inflation maybe picked ( based on flattening CPI , Energy and higher dollar ) . The stimulus package now coming down to 2 T and with Fed tapering , economic activities and risks increase ( more demand for treasuries and slower economic growth & stock market speculation) I think 10 year range is 1.35% -1.7% with short term rates (2-7 Y may increase more)