Well That was Pretty Easy

Well the 1/4% Fed Funds rate cut came and obviously was exactly as expected.

Stock and bond markets barely wiggled after the announcement – of course now there is a press conference with Powell and this is where the risk probably is–slips of the tongue can be costly. Oh well.

So for now – with this out of the way – we can get back to getting some investing done.

7 thoughts on “Well That was Pretty Easy”

  1. I did not like the market reaction to the Fed yesterday. Yes, they met expectations and the stock market did very well. I didn’t like the bond market reaction. So I went back to Nov 2016, before the election, after the election, and where we finished yesterday. I choose Nov 2016, mostly because we had a huge move in treasuries right after the elections. The numbers are the numbers.

    Yesterday 11/08/2016 11/09/2016
    1 mo. 1.61 0.28 0.30
    3 mo. 1.62 0.43 0.45
    6 mo. 1.62 0.56 0.56
    1 Yr 1.59 0.71 0.72
    2 Yr 1.61 0.87 0.90
    3 Yr 1.60 1.04 1.12
    5 Yr 1.61 1.04 1.49
    7 Yr 1.69 1.65 1.84
    10 Yr 1.78 1.88 2.07
    20 Yr 2.08 2.29 2.52
    30 yr 2.26 2.63 2.88

    As you can see the 7yr, 10 yr, 20 yr, and 30 yr are ALL below both the day of the election and the day after the election. The 1 mo through the 5-year is flat as a pancake and much higher than the day before the election and the day after the election.

    So my view of yesterday’s reaction is the stock market traders are happy that we had no surprises while the bond market traders are unhappy we had no surprises. The Fed taking a firm position of no more rate reductions is not what the bond market believes we need. An opinion? Perhaps, but this is what the numbers sat to me.

    I see more Fed pain ahead. I don’t know what numbers they are looking at.

    Economists need to be in charge of the Fed.

    My prediction is yesterday was easy. Stormy seas ahead

    1. My 5 year rate the day before the election is wrong. It should have been 1.34

      Yesterday 11/08/2016 11/09/2016
      1 mo. 1.61 0.28 0.30
      3 mo. 1.62 0.43 0.45
      6 mo. 1.62 0.56 0.56
      1 Yr 1.59 0.71 0.72
      2 Yr 1.61 0.87 0.90
      3 Yr 1.60 1.04 1.12
      5 Yr 1.61 1.34 1.49
      7 Yr 1.69 1.65 1.84
      10 Yr 1.78 1.88 2.07
      20 Yr 2.08 2.29 2.52
      30 yr 2.26 2.63 2.88

    2. The bond market wants more rate cuts because a lot of the curve is still inverted. The fed has allowed this to go on for months and it’s a mistake they have made every cycle. They never learn from their mistakes it seems.

      1. Yes but even the longer-term rates surprised me. I did not expect the rates to be lower than Nov 2016 pre and post-election numbers. That is also a statement by the bond market

        1. Don’t forget the negative yields in Japan and Europe. Money is flowing to our treasurys. Yields will stay lower for longer imho.

          1. 3 years later and our long term rates are quite lower with a higher deficit. They should be higher than 2016 due to that fact alone.

            Yes negative rates in Japan and Europe but that was also true in 2016.

            We seem to be moving backwards with now a stubborn federal reserve

  2. This is becoming a zero sum game. The 10 year should not be off this much and down to 1.78%, at least not based on the headlines of what Powell said. Everything he is saying was expected

Leave a Reply

Your email address will not be published. Required fields are marked *