Thank you Alf ! I really love your work. Would you explain more why 2-5y Treasuries have better values than US Treasuries of other years of maturity? UST 1 year yield now lies at 4.67% and 6 months now 4.74% why 2-5y US Treasuries are better investment? Thank you very much.
While I appreciate the sentiment, don't fight the Fed, I wonder to what extent the Fed is still fighting inflation vs trying to repair a financial market (really talking about the plumbing here) that remains broken following a decade+ of experimental policy. He is indirectly forcing a deleveraging of the system...and there will be collateral damage.
Too many equity investors got used to the old paradigm of QE & ZIRP, and assume that while the Fed may be tight now, all that will matter is that a future "pivot" occurs and everything will once again be rosy for equities. Wrong. The paradigm has changed. The Fed wants to bring pain and will bring PLENTY of pain by stubbornly continuing to tighten amidst declining: M2; durables prices; market rents; freight rates; and oil prices.
The bond market correctly understands what this means: lower inflation AND a recession. Equities should not be trading well above their historical multiples given such an outlook.
If a deeper recession than anticipated by the market is likely, should an investor not just simply (i) short equities and/or (ii) buy long duration bonds?
I would like to ladder the 2yr 5yr treasury strategy but which spread on the JUN 24 Eurodollar call would you recommend. Trigger happy :-) and do not want to wait until January. Please elaborate Alf and many thx in advance.
What puzzled me was Powell's comment in the press conference about positive real rates in everything but the front end of the yield curve. Is that because the 4 and 8 week T Bills are below the new Fed Funds rate range of 4.25-4.5% (and the 13 week T Bill is just within the the range)?
think the wrong file is connected to this link. this is last weeks "how much of a recession priced in "
Thank you Alf ! I really love your work. Would you explain more why 2-5y Treasuries have better values than US Treasuries of other years of maturity? UST 1 year yield now lies at 4.67% and 6 months now 4.74% why 2-5y US Treasuries are better investment? Thank you very much.
While I appreciate the sentiment, don't fight the Fed, I wonder to what extent the Fed is still fighting inflation vs trying to repair a financial market (really talking about the plumbing here) that remains broken following a decade+ of experimental policy. He is indirectly forcing a deleveraging of the system...and there will be collateral damage.
Good summary, Alfonso!
Too many equity investors got used to the old paradigm of QE & ZIRP, and assume that while the Fed may be tight now, all that will matter is that a future "pivot" occurs and everything will once again be rosy for equities. Wrong. The paradigm has changed. The Fed wants to bring pain and will bring PLENTY of pain by stubbornly continuing to tighten amidst declining: M2; durables prices; market rents; freight rates; and oil prices.
The bond market correctly understands what this means: lower inflation AND a recession. Equities should not be trading well above their historical multiples given such an outlook.
Great stuff. Do you mind clarifying how you calculate the market expected CPI expected forward over the short horizons under 1 year?
If a deeper recession than anticipated by the market is likely, should an investor not just simply (i) short equities and/or (ii) buy long duration bonds?
Incredible write up and incredible to see this all unfold right in front of us!
Great, Alf! Do you think gold will act in a risk-on fashion or be an adequate relative safety asset? She's a tricky beast that metal.
👍Good morning from the East coast of the US.
I would like to ladder the 2yr 5yr treasury strategy but which spread on the JUN 24 Eurodollar call would you recommend. Trigger happy :-) and do not want to wait until January. Please elaborate Alf and many thx in advance.
Thank you Alf
What puzzled me was Powell's comment in the press conference about positive real rates in everything but the front end of the yield curve. Is that because the 4 and 8 week T Bills are below the new Fed Funds rate range of 4.25-4.5% (and the 13 week T Bill is just within the the range)?
Why don’t you consider long term corporate or government bonds (VCLT and TLT)?
Thanks Alf!
For sure the bond market thinks the fed is completely full of shit. And very probably rightly so.
Thank you Alf!