This too shall pass. ( Inverted treasury curve)

sle said:
As an aside, there are a lot of things happening around the Fed that are very worrisome.

My primary concern is the attack on the independence of the Fed by the current administration. First, jawboning, now nomination of various stooges. Granted, this was bound to happen from the moment the Fed decided to do a monetary offset against Trump’s fiscal stimulus (or, at least, from the moment they said something along these lines). Now it is the reality and the Great Leader is not even being as subtle as Abe was 5-6 years ago. While at least one of the nominees is truly terrifying and the other one is simply scary, the real problem is where it ends. If Trump manages to put a bunch of political partisans on the Fed board, what's to prevent the next president to do so and then the next one?

Then there is the hollowing of the fed fund rate "user base" - most banks are not really using the rate any more, it's down to about 25% of what it was rather recently (has to do with various structural changes). So Feds rate announcement is tending towards symbolic, while the real actions are going to be manifested via the OMOs. Combine this with the push towards "forward guidance" as a policy tool, add my prior point and you can see how that can be a bit scary.
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I am truly saddened by hollowing out all the venerable institutions. One thing to put his doctor in charge of VA and his personal pilot to head FAA, but totally ridiculous to put pizza boy and another half baked economist as Fed. governor. Combine this with his son-in-law as policy advisor and daughter as a soft diplomat. This is truly banana republic. US used to make fun of other countries, now has become laughing stock.
 
srinir said:
pizza boy and another half baked economist as Fed. governor.
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The main problem is that Fed appointees are long-term, similar to the Supreme Court. I sure hope the Senate does not approve, but that would open the door to all sorts of issues. Fed was truly the last bastion of technocracy and if it changes we are all fucked.
 
@sle You touched a little upon this in another thread, but currently SOFR and FF still trade highly correlated. Unless it breaks down, is it that big of an issue?
 

How can these people go wrong?
Bullish on Bush: How George Bush's Owenership Society Will Make America Stronger
Foreword by Kudlow, author Stephan Moore our next Fed governor
 
Wouldn't these two gentlemen have to sit at the kiddie table and not play with their food.
I think they might last months , quit, and switch to piano lessons. Sad to joke this way of our billionares.
 
tsznecki said:
@sle You touched a little upon this in another thread, but currently SOFR and FF still trade highly correlated. Unless it breaks down, is it that big of an issue?
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Well, the problem with stuff like FRA/OIS or FF/SOFR is that when it does breakdown, it means that something went bump. I'll write a bit more detailed explanation later.
 
Here are some additional items from the FOMC minutes

The FOMC isn't concerned about a flat/inverted curve because of the "unusually low level of [Treasury] term premiums."

Several participants expressed concern that the yield curve for Treasury securities was now quite flat and noted that historical evidence suggested that an inverted yield curve could portend economic weakness; however, their discussion also noted that the unusually low level of term premiums in longer-term interest rates made historical relationships a less reliable basis for assessing the implications of the recent behavior of the yield curve. Several participants pointed to the increased debt issuance and higher leverage of non-financial corporations as a development that warranted continued monitoring.
 
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