Cutting rates was a colossal mistake. pic.twitter.com/Wd41S5B8Cp
— The Great Martis (@great_martis) January 3, 2025
$TLT is not the same as $ZB_F fwiw. 30-year bond futures are quite a ways away from all-time lows.
The long-end is on the rise for reasons that include:
– Upside economic surprises
– Risks of inflation resuming
– The Fed probably made a policy mistake by cutting so much https://t.co/RTosPstvHz pic.twitter.com/YCfZlBoWHI
— Markets & Mayhem (@Mayhem4Markets) January 5, 2025
Inflation, the hidden tax.
Persistent inflation is not a coincidence. It is a policy.
via JP Morgan pic.twitter.com/CI45diCeO3
— Daniel Lacalle (@dlacalle_IA) January 5, 2025
Stock Market Valuations suggest That this is a late-cycle market. It hasn’t been more expensive in modern times. pic.twitter.com/6KuzKA6Tq8
— Michael J. Kramer (@MichaelMOTTCM) January 5, 2025
The yield curve has been bear-steepening again.
Since early December, yields are up across the curve but the long-end has been selling off even harder than the short-end:
— Alf (@MacroAlf) January 5, 2025
On top of it, the long-end has underperformed because of an injection of Term Premium.
Term Premium is the compensation investors require to warehouse duration risk in long-end bonds: the more volatile the expected macro environment, the higher the term premium:
— Alf (@MacroAlf) January 5, 2025
In the front-end, things are super interesting too.
Our option-implied probability monitor shows investors are pricing meaningful odds of Fed hikes (?!) in 2025.
— Alf (@MacroAlf) January 5, 2025
The drawdown in bonds now matches some of the historically worse drawdowns for stocks.
And investors don’t seem to price in an imminent counter-rally.But for how long can the economy and the housing market handle high interest rates without any damage?
— Alf (@MacroAlf) January 5, 2025
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