While getting indications of slower growth from Fed comments and economic data during the months of March and April, markets continued to expect few more rate hikes. If anything was going to change because of weaker data it was the extent of policy firming but markets had not even reacted yet to that possibility when Chairman Bernanke in his testimony to Congress mentioned the possibility that not only the extent of policy firming might be shorten but also interrupted. That was too much of a change for a market that was already comfortable with its expectations on future rate hikes and that was instead, becoming increasingly concerned about inflation.
Bond rally nearing an end?
- Thread starter gharghur2
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doneQuote from gharghur2:
Send Bernanke an email
Here's my take FWIW
Bernanke has to set his own agenda.
Displaying to the markets he is hawkish on inflation, and at the same time he is his own man, and not Greenspan 2nd.
I say he pauses at the next meeting to show it's his aganda and not a continuation of Greenspan's....
If he keeps talking the talk, but not walking the walk, he'll lose credibility
Bernanke has to set his own agenda.
Displaying to the markets he is hawkish on inflation, and at the same time he is his own man, and not Greenspan 2nd.
I say he pauses at the next meeting to show it's his aganda and not a continuation of Greenspan's....
If he keeps talking the talk, but not walking the walk, he'll lose credibility
I'm flabbergasted. That's it! That's what it is! Now, I actually remember that I had the exact same thought for a brief second while reading Bernanke's testimony, where he was talking about deciding to pause.
All the big boys still short the 2yr (since about 4.68% in cash) vs. every once in awhile getting long the 10yr to leg into a flattener at advantageous levels, or at least that is what Greenwich Capital Markets has been doing. Speaking of the 2yr futures, did anyone watch that little fat finger error at about 11:40am central time? Check out the time and sales. A 9000 lot traded 24.5 (oops) and then straight up to 102-01.75 for the high of the day, then within a minute or so back down to 24.5, with a total of 15,000 or so trading on from 24.5 up to 01.75. Then, about half an hour later, after everyone and their mother was talking about the error, another 15,000 traded from 24.25 to 24.5. They barely squeezed out of that error before the FOMC. I think it was very costly though. In my opinion risk/reward is best for 5.50% pricing in say December eurodollars. Get bearish that short end.