Going into Jackson Hole, the probability of a September hike is just 20%, well below 50%, so not likely. But, as shown below, the probability of a hike in November (see below) is now 50/50
What will it be when Jay is done? Source: Jim Bianco
Treasury 10-Year real yield tops 2% for first time since 2009
The yield on 10-year inflation-protected Treasuries extended its ascent from year-to-date lows near 1%.
Rising real yields reflect firmer economy and higher deficit.
Source: Bloomberg
Argentine Peso having a rough day. An 18% devaluation to 350 pesos per dollar (chart) accompanied by a 21 percentage point hike in interest rates to 118% …
Source: Barchart
The countries that have rarely borrowed, such as Brazil or Mexico, often pay much higher interest rates than those that have much higher debt ratios, like Japan or China.
Intriguing chart by Alpine Macro
What are the latest moves when it comes to market expectations on Fed rates ?
A Fed HIKE of 25 bps by NOVEMBER moved from 30% to 33%. It is still below 50%. So not priced in. But a 3% increase (30% to 33%) is the biggest up move in a month. Furthermore, odds of rate CUTS are dropping. Markets now do not see any rate cuts until May 2024 in the base case. 3 months ago, markets expected 4 rate cuts in 2023. Markets seem to be bracing for a long Fed "pause." Source: The Kobeissi Letter, Bianco Research
Brazil central bank says faster key rate cuts are Unlikely
“The Committee judges that there is low probability of an additional intensification in the pace of adjustment,” central bankers wrote in the minutes of their Aug. 1-2 meeting published on Tuesday.
Source: Brazil Central Bank, Bloomberg
In the US, interest rates on household items are skyrocketing
In just 1 year, the average interest rate on credit card debt has gone from 14% to 21%+. New car loan rates went from 4% to 8% while used car loan rates are at 12%+. Mortgage rates are at a fresh high of 7.2%, up from 2.7% in 2021. Will the US consumer be able to absorb all these debt servicing costs? Source: The Kobeissi Letter, Macrobond, IN
The lagging effects of higher interest rates ?
Yellow Corp. filed for bankruptcy and will remain shuttered after the trucking firm’s long-running financial woes (rising bond & loan payments) were compounded by a dispute with its labor force (wage inflation). The firm closes after nearly 100 years and leaves 30k employees jobless (this will likely be reflected in a lower payroll print for August). Source: Bloomberg
