it should not take longer than this Thursday for obvious reasons. therefore it may happen tomorrow bar some new big problems in equity/credit land. the problem with obvious is that it is not always that obvious. ben does his semi-annual visit of capitol - HH testimony. maybe he says that he cuts another 200bps... and he already told that to some of his 'frendos".
200 bps. wow, we in Japan What about crude oil? what if it continues to fall? it's been getting hammered for two days and bonds aren't doing much. is it a net positive because of inflation expectations or net negatvie because falling oil better for economy. or does it matter?
i believe the economy effect is stronger. if oil is today under 100 we have no big problems whatsoever - consumer would be ok. that's what ben helped to create with his nonsensical cuts! also don't forget middle east demand for tsy which is directly related to crude.
Props to you InvertedCurve, you called it. When spooz are tanking all that inflation fear goes right out the window. Fannie and Freddie down big again today. Personally I do not think treasuries will be all that concerned with inflation as long as financials continue to trade down, because if things are as bad as people fear they might be with financials, it will have deflationary effects. But like you said donât fight the tape, things donât have to make sense and markets always seem to stay irrational, longer than most can stay liquid. E.g. all the people who were trying to short the homebuilders back at the end of 04 through 05.
the flipside is if the fed has to bail out fannie & co, it will be a major event they are going to have to print a huge amount of money to do the bail out. results? Inflation, and possible downgrade of US debt (whether by traders or rating agencys or both) neither good for treasuries....
JasonJm, There is a good editorial in the WSJ on that issue of bailing out the gseâs. I am not one of those âsky is falling peopleâ but this seems to be a REAL mess!! At the prices fannie and Freddie are trading at, would it even be possible for them to raise any money other than a govt. bail out? Poole called them insolvent in that Bloomberg interview. But you are correct, if things get bad enough where the govt has to bail them out, it would be a disaster for treasuries and the dollar.
omg - look at the import prices +20% yoy. it is bad even when you remove oil effects! this is becoming insane with fed funds at 2%...