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Fed doesnt have to raise rates, the market is gonna do it. The Fed announced it will no longer buy Treasuries, that fact will start the selling of treasuries, and that will cause rates to go up, and the dollar along with them.
the government cant continue to prop things up artificially much longer. they will learn they have to let the cards fall where they may so we can have a stronger foundation. Prices in all asset classes have gone up enromously out of whack thanks to the easy lending and debt the consumers have taken on. consumers are now addicted and the government is just fueling the addiction
"How are Americans going to refinance their homes, pay their auto loans and credit card loans off if yields move higher???"
I love Dollar bears. Many sound like they were born yesterday.
If a homeowner can't refi at 7%, then they probably can't at 5%. Auto loans? LOC money can be found anywhere under 2.5%. You mean a "jump" to 3.5 or gasp, 4% for LOC money is onerous? As far as credit cards, the fed funds rate could go up 400bps and not affect rates at all. There is so much gouging going on in that market that the only parties affected would be the slimeball lenders. Besides, credit worthy consumers (you know, the ones that dont default) pay their bills on time anyway, so it doesnt matter what cc rates are.
One thing you have to realize when you lecture this person... He, and most people in fact, ACTUALLY THINK that the Fed "controls" the rates, that they "set" the market.
He will be astonished right up to the point where the DXY reaches 98-100. He'll scratch his head while he sits in his cardboard box and think to himself... "But the fed didn't raise rates !"
Please note that I am well aware the the United States Federal Reserve meets ca. eight times a year to vote whether to raise, lower, or not change the Fed Funds Target Rate which directly influences and effectively sets the United States Prime Interest Rate. So, please do not tell me that the Federal Reserve has no general jurisdiction over the rates of CD's and other savings instruments. Please note that I am not ignorant and to portray the United States Federal Reserve as having no jurisdiction over interest is patently false and mis-leading.
Furthermore, the United States Federal Reserve is charged with managing the nations money supply. It does this by issuing the nations currency which is bought from the BEP. So, again I am not ignorant, and am as you are well aware of how the Federal Reserve works in regards to the supply of money in the United States.
The current Federal Reserve monetary policy is one of issuing excessive notes (currency) to bail out the failed financial institutions on wall street, and to create phony liquidity in the financial system. This policy has driven the stock market up over 50% from its March lows of this year and fueled stocks and lowered and almost devalued the United States dollar in order to prop up the failed financial system.
This policy is wrong and will create more problems than before.
I'm no longer so sure that's going to happen even after the end of Quantitative Easing. I mean, I want it to, and have money set aside to take a position in TBT or TMV, but I'm waiting to see if Treasuries decouple from Equities.
The last two months, The relationship has been: market down, dollar up, treasuries up. That's a clear indicator of the safety trade. If the relationship holds, we may not be able to count on Bond yields increasing due to market pressure. We could instead see something like the end of last year, where stocks fall and the flight to safety causes treasuries and the dollar to rise. In such a scenario, bond yields would be held down due to increased demand.
The results of the 10y and 30y auctions next week should be very interesting.