Perhaps you should factor in QT as well, not just rates. QT is a liquidity killer, and liquidity drives markets. Looking at rates without QT creates an incomplete picture.
Excellent analysis and insight. I certainly understand the technical bond indicators, but the fundamental story coming out of the FED doesn\’t match. I\’ve heard a number of Fed officials say they want to get short term rates to 2.5% by year end and then see where we are. My interpretation of that is they could go higher than 2.5% in 2023 but I personally don\’t see them going lower outside of a dramatically slowing economy or recession. Certainly I expect .5 in June and July which will take us to 1.75%, a short distance from 2.5%. I have heard some FED members calling for much higher rates also. So matching that with bond yields, I\’m thinking the 2 year should price in the possibility that rates might go higher than 2.5% in 2023. So at least 2.75% on the 2 year. I guess it\’s possible the curve inverts and the 10 and 20 year are lower than the 2. But I\’d more expect them to be at least slightly higher outside of a recession. 3% on the 10? 3.25% on the 20? Thoughts?
Perhaps you should factor in QT as well, not just rates. QT is a liquidity killer, and liquidity drives markets. Looking at rates without QT creates an incomplete picture.
I’ve been thinking about that too, M2V is a shitfight :/
Is the US10Y really peaking? I´m not completely sod on that, also I´m long bonds for now.
Excellent analysis and insight. I certainly understand the technical bond indicators, but the fundamental story coming out of the FED doesn\’t match. I\’ve heard a number of Fed officials say they want to get short term rates to 2.5% by year end and then see where we are. My interpretation of that is they could go higher than 2.5% in 2023 but I personally don\’t see them going lower outside of a dramatically slowing economy or recession. Certainly I expect .5 in June and July which will take us to 1.75%, a short distance from 2.5%. I have heard some FED members calling for much higher rates also. So matching that with bond yields, I\’m thinking the 2 year should price in the possibility that rates might go higher than 2.5% in 2023. So at least 2.75% on the 2 year. I guess it\’s possible the curve inverts and the 10 and 20 year are lower than the 2. But I\’d more expect them to be at least slightly higher outside of a recession. 3% on the 10? 3.25% on the 20? Thoughts?
Thank you for this analysis, it´s very useful, gives me a great help in my SPX credit spreads/iron condor operations. Have a nice weekend.
I feel you are missing the QT story here. How did market reacted when QT started in 2018?