Bank of America Corp. expects the Federal Reserve to announce plans to begin tapering the runoff of its Treasuries holdings in March, coinciding with its first 25 basis points interest-rate cut.
- The Reverse Repo ("RRP") is de facto QE-infinity $ printed during 2020-21 that was sitting dormant. It's now being used to buy up US Treasuries. Problem: it is declining at a very rapid pace and might be gone by the end of January 2024. - Something needs to be done to preserve QB / liquidity. - This is why the Fed is now thinking about slowing down the pace of QT. Over the week-end, Dallas Fed chief Logan said the Fed should slow Asset runoff as Reverse Repo dwindles - 2024 is an election year and we expect net liquidity to be supportive for the economy, bond markets and risk assets
Freddie Mac Serious delinquency rate US multifamily homes
thru The Daily Shot
BREAKING: The US job market remains strong
In December, the US economy added 216,000 jobs, above expectations of 170,000. This means that the US economy has now added jobs for 36 consecutive months. The US Unemployment Rate held steady at 3.7% in December (consensus estimate was for an increase to 3.8%). Wages actually increased to 4.1% year over year from 4% in November. The market reaction is as you'd expect - yields higher, with fewer rate cuts being priced in for 2024. In light of these numbers, there is a problem with the number of FED rate cuts being priced in. Source: Bloomberg
Could a hot US job print invalidate the downward trend in bond yields?
The US 10 year is flirting with the massive 4% levels again. A close above it and things could become even more "dynamic" to the upside. Note 21 day right here, while 50 day remains way higher. Source: Refinitiv, TME
The government debt maturity wall
Bloomberg thru Jeroen Bloklan / M_McDonough
A remarkable chart. The sector composition probably does not explain everything
Source: Michel A.Arouet
FED meeting minutes key takeaways:
1) rates likely at or near their peak 2) 2pct inflation target is maintained 3) monetary policy is likely to stay restrictive for some time 4) clear progress has been made on inflation (dixit the Fed) 5) see rate cuts by the end of 2024 FOMC views continue to diverge from market expectations (2x more rate cuts are currently priced vs. Fed guidance) Source: CNBC, The Kobeissi Letter
The international role of the US dollar in one chart
Source: JP Morgan
