Another 25 bps cut in interest rates This analysis predicts a FED 50 bounce cut. The chart shows the yield curve of the two-year US government bond and its future path. The current analysis attempts to predict the next three months' interest forecast. Let's look at the chart. It can be seen that in the shorter term, the market once again ran ahead. It can be seen that the intervention was a hurry for the Fed to announce a further cut in interest rates at the open market committee meeting on March 18. In my opinion, this can happen if the market prices future rates in the 0.5% range within a few days. In the event that the futures interest rates continue to fall as a "falling knife", it can be stated with certainty that, in addition to interest rate cuts, additional asset purchase incentives may be announced.
What happens if priced in rate cuts and actual rate cuts have no effect on the US economy? Rate cuts are known to have a time lag before economic benefits are seen, by about 6 months to 2 years. The current rate cuts or those that may happen can't have any immediate effects on the economy. The economy is not the stock or bond markets. So - in reality the FED could not possibly believe that this sort of stimulus measure is likely to have effect in a wild and unpredictable virus effect which is still rapidly escalating - not just in the US but in the whole world.
The only countries in the world now not affected are Anatartica and the Arctic Circle.
The evidence from China is that mass quarantines do have an effect to contain spread. But due to constitutional law issues in many first world countries mass quarantines are difficult if not impossible to implement. The best the USA could hope for is that the virus does not spread. That would be a hope based on nothing.
The fiscal measure of $8 Billion injection into health procedures is actually nothing. It will be consumed in a matter of days.
I don't know how or why people invest in bonds. There the worst deal ever when yields fall so low cuz hope of a good return depends on better fools willing to pay more for the debt. Even if the FED monetizes bonds it will be with weaker US Dollars (due partly to QE effects but also to massive de-dollarisation which has been going on for the last 5 years).
Keep in mind always that the FED only a few months ago were happy with the economy and had no plans to implement a string of interest rate cuts. So everything is connected to the virus effect.
wertzui
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Is it just me or it looks like they lost control on both short and longs ends of the yield curve?
meszaros
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@wertzui, I agree with you. The market already sees this.
The only countries in the world now not affected are Anatartica and the Arctic Circle.
The evidence from China is that mass quarantines do have an effect to contain spread. But due to constitutional law issues in many first world countries mass quarantines are difficult if not impossible to implement. The best the USA could hope for is that the virus does not spread. That would be a hope based on nothing.
The fiscal measure of $8 Billion injection into health procedures is actually nothing. It will be consumed in a matter of days.
I don't know how or why people invest in bonds. There the worst deal ever when yields fall so low cuz hope of a good return depends on better fools willing to pay more for the debt. Even if the FED monetizes bonds it will be with weaker US Dollars (due partly to QE effects but also to massive de-dollarisation which has been going on for the last 5 years).
Keep in mind always that the FED only a few months ago were happy with the economy and had no plans to implement a string of interest rate cuts. So everything is connected to the virus effect.