US DOlLAR, FEDERAL RESERVE, RATE CUTS – Speaking Factors:Fed fee cuts sink bond yields, however credit score situations aren't im
US DOlLAR, FEDERAL RESERVE, RATE CUTS – Speaking Factors:
- Fed fee cuts sink bond yields, however credit score situations aren’t improved
- Markets could also be stockpiling money, signaling worries about disaster forward
- US Dollar might resume 2-year uptrend on rising liquidity premium
Monetary markets have been betting on a dovish flip in Fed financial coverage since late 2018 as a downturn in international financial development that began to set in earlier that yr deepened. Priced-in expectations for the goal Fed Funds fee 12 months into the longer term plunged, pulling benchmark bond yields decrease alongside the way in which.
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FED STRUGGLING TO DELIVER STIMULUS WITH INTEREST RATE CUTS
Curiously, that doesn’t appear not appear to have loosened credit score situations in a significant approach. The item of fee cuts is to cut back the price of borrowing, encouraging consumption and funding to spice up development. Information from Bloomberg means that has not occurred.
Monetary situations loosened in anticipation of the speed lower cycle within the first quarter of 2019. Since early might nonetheless, they’ve been tightening anew even because the Fed coverage outlook has turn into ever-more dovish. Put merely, Fed stimulus doesn’t appear to be transmitting into the broader credit score markets.
That is an ominous signal, suggesting that market members discover the Fed’s efforts as an inadequate…