Syz the moment

Source: www.zerohedge.com

China 10Y yield moves below 2.47%, breaking Covid19 lockdown lows. With local equity market imploding and real estate in freefall, fears of a Japanese style deflationary spiral are growing. Should China devalue the renminbi ? Chart vy Sylvain Baude, CFA, Bloomberg

Source. Michel A.Arouet

Governor Hafize Gaye Erkan's sudden resignation from the Central Bank of Turkey (CBT) has stirred questions about its impact on monetary policy and financial markets. Erkan, who made history as the first woman to lead the CBT, took office less than eight months ago with a mandate to adopt a more orthodox monetary policy. She swiftly raised the benchmark interest rate to 45% to combat soaring inflation. Following Erkan's exit, her deputy, Fatih Karahan, assumed leadership. With experience from the New York Federal Reserve and Amazon, Karahan is expected to maintain a strict monetary stance. He affirmed a commitment to monetary tightening until inflation aligns with the CBT's goals. This transition arrives amid high consumer price inflation, expected to remain around 65% for January. Karahan's appointment underscores the nation's policy continuity and commitment to economic stability through orthodox monetary measures. As financial markets react, we'll closely watch the CBT's policy decisions under Governor Karahan's leadership and their impact on the Turkish economy. 🇹🇷📈 Source: Bloomberg #CBT #TurkeyEconomy #MonetaryPolicy #MarketImpact

💡 Today, the Bank of England (BOE) is convening for its highly anticipated meeting, and we're closely monitoring it for potential shifts in their monetary policy tone. The BOE's impending Monetary Policy Committee decision promises to be intriguing, with current expectations leaning towards maintaining the benchmark rate at 5.25%. 📉 Indeed, a significant twist in the narrative has occurred. The UK's inflation outlook has undergone a substantial revision, with current projections indicating a return to the 2% inflation target by the summer of 2024 – a whole year earlier than previously anticipated. This could have far-reaching implications. 📊 Adding to the intrigue is the possibility of a single vote in favor of a rate cut and a potential softening of the BOE's previous tightening stance. While the risk remains that the BOE might stick to its hawkish position, the evolving economic landscape could set the stage for an earlier easing cycle, potentially commencing as soon as June. 💬 The shifting dynamics of inflation and the subsequent responses by central banks are pivotal indicators for market movements. Fixed income investments may see considerable benefits from these potential developments.

Investment Grade Companies have issued more than $150 Billion worth of bonds through the first 18 days of the year, the highest amount in history at this point in the year. Source: Barchart, FT

This week, several prominent Federal Reserve members shared their perspectives on monetary policy. These insights reflect a general sentiment among Fed speakers that challenges the current market expectations of numerous rate cuts in 2024. They emphasize the importance of data and a measured approach in shaping monetary policy decisions. Here's a snapshot of their views, along with a special focus on the dovish/hawkish scale by Fed members: 🔹 Austan Goolsbee (President, Chicago Fed) highlighted the need for a data-driven approach, suggesting that a continued decline in inflation would merit discussion of cutting interest rates. However, he stressed the importance of evaluating the data meeting by meeting. 🔹 Raphael Bostic (President, Atlanta Fed) urged caution on interest-rate cuts, emphasizing the need to navigate unpredictable events. He believes it would be unwise to rush into rate cuts and wants more evidence of inflation reaching the 2% target. 🔹 Patrick Harker (President, Philadelphia Fed) highlighted the importance of "soft data" from district sources, providing valuable insights for policymakers in setting monetary policy. 🔹 Christopher Waller (Fed Governor) advocated a cautious and systematic approach to rate cuts, emphasizing that the FOMC should move carefully based on data. Check out the dovish/hawkish scale by Fed members for a deeper understanding of their stances. Source: Bloomberg #FederalReserve #MonetaryPolicy #EconomicOutlook

As we move further into the new year, there's a noteworthy trend unfolding in the world of finance - the steady rise of the 10-year US Treasury nominal yield. However, it's not as straightforward as it may seem. While many have been discussing the prospect of strong disinflation, what's actually exerting pressure on higher rates are the increasing long-term US inflation expectations. You can see this clearly in the chart below, which tracks the 10-year US breakeven (BE) rate and the 5-year, 5-year USD inflation swap rate. Both have climbed by more than 10 basis points, while the US real rate remains lower than at the beginning of the year. So, what is the market pricing in? Is it a reflection of the Federal Reserve's successful navigation toward a soft landing for the US economy? Or is it a response to rate-cut expectations, hinting at the resilience of the US economy? The dynamics at play here are fascinating and open up a world of possibilities. As we continue to monitor these developments, it's clear that 2024 holds some intriguing questions for investors. Source: Bloomberg