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The Fed’s Bond Dealer: This Will Inflict Pain

Talking Numbers

Cantor Fitzgerald trades half of all US Treasury bonds and is one of few primary dealers authorized to trade directly with the New York Federal Reserve Bank. CEO Shawn Matthews talks numbers on the markets, interest rates, and banking.

According to Cantor Fitzgerald CEO Shawn Matthews, you can expect interest rates on 10-Year US Treasury bonds to move up to 2.4% very soon. Though that may not seem like much, “that can inflict some pain” to bond investors according to Matthews.

Few people are as in-tune with the Treasury markets quite like Matthews. Cantor Fitzgerald is one of only 21 primary dealers authorized to trade with the New York Federal Reserve Bank. And, they trade about half of all Treasury securities.

As investors leave the bond market, they’re headed elsewhere, namely stocks. This is occurring while Matthews expects the Federal Reserve Bank to reduce the money supply by year’s end.

On another note, Matthews also believes there will be a change in how investment bankers get paid. Though he doesn’t see the end of giant paychecks, he does believe that bankers will find their compensation tied more and more to their banks stocks.

Is there a way to trade broker dealers to take advantage of the changing environment?

We asked Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, to analyze the charts of the iShares Dow Jones US Broker-Dealers (IAI).

To hear more of Matthews’ insights on the economy, the markets, and where financial services are headed and to hear Ross’ idea on what he thinks are opportunities in broker-dealers, watch the video above.

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