10 Year UST Yield: Setting up for Major Septaper Disappointment?
Kommentarer
QuantitativeExhaustion
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Looking to go long EEM if so
andrewunknown
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for whatever reason, comments kept appearing in my activity but stopped posting here yesterday afternoon - sorry to drop off like that.
Anyway: I'm familiar with it, but hadn't given the implications for BRICS or EM quite as much consideration - but no doubt this month's (non?)decision will of significantly impact them, just as the last 4 months of speculation has. Time for some additional research! Thanks for the chart.
fb_fabien
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We are close to the 3% psychological level...
The taper trade is over played. What if the Fed do a "light" tapering, or no tapering at all? then the yield will drop...
andrewunknown
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It's difficult to say what the market would deem a "disappointing" taper: Esther George would like a 15B reduction to 70B this month. 10B evenly split between USTs and MBS is another idea I've seen more than once. Given how aggressively USTs have sold off, something very hawkish will have to be announced to renew UST bearish fervor here. The composition of the FOMC (uber-dovish), their feelings (I'm sure) the market has over-discounted tapering (hell, the market has begun to discount Fed portfolio liquidation), and the firming but not exactly stellar macro data (e.g. Summer NFP revisions bring rolling 4-month avg May-Aug down to 160k) all suggest to me what you've concluded: the trade is overextended. The FOMC is the likeliest catalyst to now bring the pendulum back in the other direction.
QuantitativeExhaustion
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everyone already sold on Sept taper and now were guessing how many billions in reduction.. if it don't come in Decemeber what will happen... S&P blast off !
QuantitativeExhaustion
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sorry should say.. if it don't come in September ..what will happen?
andrewunknown
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That's the tough question: easy to say "it won't happen"; or "it will be disappointing". But, then what? The next FOMC is October 29-30; but it's not accompanied by Bernanke Q&A. The one following occurs December 17-18. Whenever it begins, it will occur at a regularly-scheduled FOMC (don't want to attach extraordinary significance or a sense of urgency by making a special announcement), and one with a Q&A after since clearly communicating the rationale will be critical to dampening market volatility and setting expectations. So, September 18, or December 18.
A very small (<5bln) taper or none at in all in September may mean a continuation rally; but after all the anticipation, it may actually startle and frighten. Remember QE3 was announced by Bernanke at last year's September FOMC on 09/13/12: and the S&P declined ~10% in the 2 months following. This meeting may also be "too much of a good (dovish) thing" if taper doesn't occur. But then again, you may be right - I just like to consider all angles!
QuantitativeExhaustion
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yeah all big Fed moves are meetings tied with Q&A from the Chairman. + we have the added talk of Larry Summers hawkish vs. Janet Yellen Dovish
andrewunknown
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supposedly now put on-hold by Obama because of Syria. LOL Guess it's ill-advised to change Fed chairmen mid-stream when you're riding hard to war.
QuantitativeExhaustion
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Well they must believe this Syria+BRICS situation could have implication for a long period. Wonder what's going on behind the scenes here?
Looking to go long EEM if so