Inflation surprises are picking up since Fed rate cut...
Source: www.zerohedge.com, Bloomberg
Mind the gap: Assets in US money market funds have hit a fresh ATH at $6.5tn, although the relevant Fed Funds Rates have fallen and are likely to fall further.
Note however that the "relative" figures (i.e money market funds AuMs as a % of total assets AuMs) currently stand at all-time low whereas equities weight is at all-time high... Source. Bloomberg, HolgerZ
Bond market volatility is spiking:
The ICE BofA MOVE Index hit 123.8 points last week, the highest level since January. The MOVE index, also called the “VIX of bonds” is a metric measuring yield volatility of 2-year, 5-year, 10-year, and 30-year Treasuries. The index has skyrocketed 38% in just 3 weeks as yields started rising following the Fed's decision to cut rates by 50 bps. Over this period, the 10-year Treasury yield jumped from 3.64% to 4.10%. At the same time, the popular bond-tracking ETF, $TLT, fell by 6.8%. What happened to the "Fed pivot?" Source: The Kobeissi Letter, The Daily Shot
In case you missed it... Atlanta Fed President Raphael Bostic is okay with skipping rate cut in November 🚨
Source: Barchart
FOMC MINUTES WERE PUBLISHED TODAY, here are the highlights 👇
▪ ‘Substantial majority’ backed half-point rate cut ▪ ‘Some’ officials would have preferred quarter-point cut ▪ ‘Almost all’ officials saw higher risks to labor market ▪ ‘Almost all’ participants saw lower inflation risks The key takeaway >>> FOMC Minutes Show Fed Considerably More Divided Over Size Of Rate Cut While there was only one dissent, the FOMC Minutes show "some" officials preferred a 25bps cut. Despite the apparent dovish pivot, expectations for rate-cuts (this year and next) has plunged dramatically - see chart below Source: Stocktwits, zerohedge
This time is different…
Historically, Fed rate cuts triggered market rallies led by valuation expansion. But this time, it seems that markets front-loaded the Fed by accumulating us stocks AHEAD of the Fed decision. Bottom-line: Current market valuation is now on the high side vs. other instances in history when the Fed cut rates. This should limit the amplitude of the current bull equity Source: David Marlin
Fed Chair Jerome Powell just said the recent 50BPs interest rate cut shouldn’t be interpreted as a sign that future moves will be as aggressive - CNBC
“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course,” he told the National Association for Business Economics in prepared remarks. “The risks are two-sided, and we will continue to make our decisions meeting by meeting” The market currently thinks there's a 68.2% chance Jerome Powell and the Fed cut rates by 25BPs at the next FOMC meeting Source: CME FedWatch Tool
😱 The shocking chart of the day: THE FED REPO FACILITY FOR EMERGENCY LIQUIDITY HAS BEEN TAPPED FOR 2.6BN$! 😱
Is a big bank in troubles ??? Source: JustDario on X
