Yield Curve Inversion IV
By June 10th, after the 5 & 10 year note auctions, treasury budget, foreign trade report and Alfred E. Greenspun's testimony on the economy, we will know where the Fed, interest rates, economy and stock market are headed.
A break out might occur on June 30th if the Fed removes the word "measured" and to avoid confusion, indicates the potential for a pause at the August 9th meeting. That would spark a breakout that could last until the Treasury 30Y bond announcement in late August.
The more likely scenario is, with todays GDP read and Gramlichs comments that we have "made it through" the current softpatch, and the underlying economic currents that point to a 2nd half revival, there will be no break in rate increases this summer.
If Non-Farms surprises to the upside again on June 3rd, I look for the word "measured" to be dropped at the June 29th meeting. This should be interpreted as meaning 25 basis points at the August 9th meeting and 50 basis points in September.
Alfred E. Greenspun is playing it very close to the vest these days. The timing of the 30 year bond announcement and RMB 5% unpeg in August need to be perfect in order to effect the yield curve adjustment necessary to avoid a flatline or inversion.
25 basis points on June 29th and 25 more on August 9th equal 50 basis points added to the target rate raising it from 3% to 3.5%.
The current margin between 30 & 10 year = 33; 10 & 5 year = 26; 5 & 3 year = 11; 3 & 2 year = 7; 2 year & 6 month = 51; 6 & 3 month = 21; 30 year coupon = 5.375, 30 year mortage = 5.21.
The current 10 year note will get flattened in August to under 4%, the new 10 should be around 4.30 and the new 30 will be at around 4.75 - 5% in the January auction. Just my opinion, I could be wrong.
A break out might occur on June 30th if the Fed removes the word "measured" and to avoid confusion, indicates the potential for a pause at the August 9th meeting. That would spark a breakout that could last until the Treasury 30Y bond announcement in late August.
The more likely scenario is, with todays GDP read and Gramlichs comments that we have "made it through" the current softpatch, and the underlying economic currents that point to a 2nd half revival, there will be no break in rate increases this summer.
If Non-Farms surprises to the upside again on June 3rd, I look for the word "measured" to be dropped at the June 29th meeting. This should be interpreted as meaning 25 basis points at the August 9th meeting and 50 basis points in September.
Alfred E. Greenspun is playing it very close to the vest these days. The timing of the 30 year bond announcement and RMB 5% unpeg in August need to be perfect in order to effect the yield curve adjustment necessary to avoid a flatline or inversion.
25 basis points on June 29th and 25 more on August 9th equal 50 basis points added to the target rate raising it from 3% to 3.5%.
The current margin between 30 & 10 year = 33; 10 & 5 year = 26; 5 & 3 year = 11; 3 & 2 year = 7; 2 year & 6 month = 51; 6 & 3 month = 21; 30 year coupon = 5.375, 30 year mortage = 5.21.
The current 10 year note will get flattened in August to under 4%, the new 10 should be around 4.30 and the new 30 will be at around 4.75 - 5% in the January auction. Just my opinion, I could be wrong.
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