Asian stocks and U.S. equity futures fell, while the dollar rose as an increase in the Federal Reserve’s discount rate spurred concern the economic rebound will slow as stimulus programs are unwound.
Fed policy, despite claims to the contrary, follows market rates. The positive spread between the 2-year note and fed funds rate suggest loose monetary policy. The greater the spread, the more the market is telling the Fed to tighten up.
2-Year Note less Fed Funds Rate:
The last Fed tightening cycle began on June 2004 and ended on June 2006. While gold will likely experience the knee-jerk, "this is bullish for the dollar" F-TV commentary, it is nothing more than another illusion. The reality is that gold had a massive run from $396 to $613 between June 2004 and June 2006.
As the Fed speaks loudly and carries a very small stick. The action in the bond market continues to illustrate lower prices with a strong tape. The 1/12 overhead gap on the double inverse ETF (TBT) was filled with an aggressive expansion of volume. This is bullish an implies building upside force on the double inverse ETF. This implies building downside side force in US long bonds.
Long Bonds Double Inverse ETF (TBT)
Source: bloomberg.com
Source: ny.frb.org
0 comments:
Post a Comment