The FED cannot hike ratesIf they try that brings us above trend, they will need to revamp QE to save this market from a recession or possible collapse. The bonds have run lately, my thesis is they will go ahead and say the market has hiked rates for them and meanwhile keep the QE pump going to subdue the bond yields from spiking any higher. If this starts to happen it could freeze the credit markets, we need to keep the cheap money flowing because we are now addicted to it, Yellen tried in 2018 and failed had to drop them back to zero.
Yellen Failed rate hike
www.cnbc.com
You can argue whether this graph really shows anything maybe its a coincidence? But the 2yr has shown its an important indicator and is controlled by the FED. A Keynesian economist should argue we hike rates during a market boom and cut during a market decline, however in our case all we do is cut with failed attempts in rate hikes. We have moved to an age of MMT and during FED testimonials make Japan the model or refer to them as being in worse debt than we are. Credit markets are fragile and as bond yields spike higher we are seeing adverse affects on the economy.
Whether you agree with me or not I think the test is what the FED announces in March and how the markets react, if they do rate hike from where we are then they created a noose as we should break trend. BUT IF they say the market has already hiked them for us then WE KNOW they likely see the same trend.
Just my thoughts I am an idiot on the internet but wanted to share this in case I am correct. Good luck in your trades!
US02Y trade ideas
Government Bond Yield Surge - US2Y, US5Y, US10YThe crypto & stonk killer. Rates have been exceptionally low because of crisis. Look back to 2009. They went up in 2016 for a little bit while donnie complained. (he wanted that easy money because he tweeted about stonks his entire time in office). They drifted lower thereafter and then BAM! Another crisis the government had to print through. Where did all the PPP money go??? Kodak? DWAC? Nobody knows. Frauds abundant and the Fed will now run-off their near $9T balance sheet and start lifting rates. Plebs keep buying $SPY & Tesla calls or Simpcoins. #clueless
Should be an epic show.
*valuations matter
Rates will bust the Fed's 2% Long Term average goal with ease. Crypto kids will go broke and they should blame their doge daddy for pumping them for personal gain.
The "trillion" dollar companies will implode. Shibby Bitty too. All of it.
GL
A Macro Thread on YieldsThe bond market can be quite tricky.
In terms of yield curves consider the following:
Bear steepening
Bull Steepening
Bear Flattening
Bull Flattening
> Steepening (the premium for longer debt is growing)
> Flattening (the premium is shrinking)
For example, bull steepening, which is exactly what we have been doing this since the start of this year:
The short-end of the yield curve (typically driven via fed funds rate) falls faster than the long-end, steepening the yield curve.
The long end of the yield curve is driven by a wide range of factors, including - economic growth, expectations, inflation expectations, and supply and demand of longer-maturity Treasury securities and etc
📍 A bull steepener
↳ is a shift in the yield curve caused by falling interest rates - rising bond price - hence the term “bull”.
📍 A bull flattener
↳ is the opposite of a steepener - a situation of rising bond prices which causes the long-end to fall faster than the short-end.
📍 Bear steepness and flatteners
↳ are caused by falling bond prices across the curve
A bull steepener is a change in the yield curve caused by short-term interest rates falling faster than long-term rates, resulting in higher spread between the two rates. A bull steepener occurs when the Fed reserve is expected to lower interest rates. This expectation causes consumers and investors to become optimistic about the economy and bullish about prices in the stock market above the short-term.
Thanks as usual for keeping the feedback coming 👍 or 👎
What Yield? 2-Year Treasury Lows May Signal It's Bitcoin Time Several stakeholders in the crypto market see a lack of yields coming from traditional markets as a sign cryptocurrency has a place in uncertain times.
“We are moving into a period of stagflation – stagnant growth and inflation – which creates a steepening of yield curves in the fixed income world,” said Chris Thomas, head of digital assets for Swissquote Bank.
Indeed, U.S. Treasury yields have dropped in 2020 – the two-year maturity is at its lowest yield in over 10 years.
“I have a customer leaving bonds for bitcoin. I look at that as very bullish,” said Henrik Kugelberg, a Sweden-based over-the-counter crypto trader. “Bonds that are supposed to be the safest bet there is to actually make a buck on your invested money now all of a sudden seems less attractive than bitcoin.”
US 2Y yield indicates further FED cuts are almost guaranteedThe FED has already cut the rates by 50 bps in an "emergency meeting" last week. The US02Y indicates that that was not enough and more cuts are needed. If history is any indication, we're looking at another cut of 50 bps or even 75 bps very soon .