The reason why tighter bank lending conditions bite Eurozone economy faster, while US companies still don’t suffer under higher rates due to longer duration.
Source: Patrick Krizan, Michel A.Arouet
A record $8.9 trillion of government debt will mature over the next year.
Meanwhile, the government deficit in 2024 is projected to be $1.4 trillion. This means that someone will need to buy more than $10 trillion in US government bonds in 2024. That's nearly ONE THIRD of all outstanding US federal debt right now. All while the Fed is expected to start cutting rates, making buying these bonds less attractive. Who's going to fund all of this debt? Source: The Kobeissi Letter, Apollo
Do you remember the dramatic loosing of Financial conditions at the end of 2023?
The lagged effect of this massive loosening is now hitting and is supporting the US economy (and this NOT doing The Fed's job...). Indeed, US economic surprises keep surprising on the upside. The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2024 is 4.2 percent (!!!) on February 1, up from 3.0 percent on January 26
Mentions of Job Cuts in Earnings Calls Hits Pandemic Peak
Layoffs are being mentioned on US earnings calls at the HIGHEST rate since the pandemic, according to Bloomberg. Source: Bloomberg, Genevieve Roch-Decter, CFA
Nice cartoon by hedgeye...
Let see how long Powell will resist not cutting rates... Trump seems to have already decided about his faith anyway...
BREAKING: US NFP at 353k way above the estimated 185k, Wages came in hotter than expected +4.5% YoY vs +4.1% expected.
The December jobs report has been revised UP, showing 333,000 jobs added rather than the 216,000 originally reported. This breaks a 10-month trend of downward revisions in the reported jobs number. Meanwhile, average hourly earnings in January rose 0.6%, DOUBLING expectations. Unemployment rate held flat MoM at 3.7% (the Street was anticipating 3.8%). Note that according to the Household survey, the number of employed people dipped by 31k MoM, so US Non-farm-payroll report is not as hot as at 1st sight. Source: Bloomberg, HolgerZ
The US Treasury will hold some of its largest-ever debt auctions in the coming three months in an effort to fill the yawning federal budget deficit.
The Treasury said on Wednesday it would increase the size of auctions at most maturities for the next three months, with two-year and five-year auctions hitting record sizes. The five-year auction in April, for $70bn, would be the biggest ever for debt with a maturity of two years or more. The US has been increasing its borrowing over the past few quarters, as the gap between government spending and tax revenue has grown. The federal deficit stood at $1.7tn last year. Source: FT https://lnkd.in/eSyQHXu9
The Fed said that a March rate cut is "unlikely," yet futures are still pricing in a 39% chance it happens
Even as the Fed said they cannot cut rates until inflation is comfortably moving to 2%, markets still see 6 cuts in 2024. There's even a growing 23% chance of 7 interest rate cuts this year. Markets are pricing in a rate cut at EVERY remaining Fed meeting this year. As highlighted by the Kobeissi Letter, if the Fed is on track for a "soft landing," why do we need to many rate cuts? Source: The Kobeissi Lette
