Last quote by George Goncalves
George Goncalves quotes
You have almost $200 billion a month and a captive buyer. That hasn't changed. So what's new is just that we're not learning they want to do more.
The last two years especially, the markets have been operating on the nuances coming out of the overseas market, more than anything locally driven. It worked in one direction in terms of driving rates to super-low levels, back in July and it works in the opposite direction as well.
It shows in the first place that bonds were overvalued and disconnected from fundamentals.
The problem is the market is accustomed to seeing bold easing programs. Basically we're kind of toward the end of the line when it comes to central banks being able to move the broader risk markets and it's going to come back to fundamentals.
Given how it's been very technical, I do think breaking 1 percent requires a recession, or people really start to fear that's what we're heading for. People are talking about that. 1.25/1.30 is a good level to stabilize, and 1.15 is what technicians are looking at. These are just numbers, but nothing stops it from going lower.
What got us here is Brexit news, and what's keeping yields here is a level of skepticism that this is not over and, if this is a long-term issue, then rates won't go up for a long, long time.
You don't want to expose that you don't have any ammunition. You don't want to go into a battle saying you're not loaded. A lot of the stuff is about psychology, making people think you could actually do something. If they were to prematurely ease and not have any merit behind it or confidence it would work, it would be counterproductive. It would be just like when Japan did negative rates in January.
The central banks are Hoovering up all of these bonds. But yet it hasn't promoted growth or inflation. Maybe these policies are not effective. That new theme, which has been growing throughout 2016, is: 'Those guys can't generate growth and help the world economy. I have to buy bonds.
I'm just worried about what this means for the state of the world when you have rates grind lower and people are questioning the efficacy of central banks. To me, the bigger issue at hand is we don't have a sustainable way to create upward growth.
What recent history has shown us is you cannot definitively say there's a level in rates that cannot be breached.
If they were going to hike in June, the two-year would be at 1 percent.
We're basically trying to guess a three-month window of a Fed hike. Let's just say they're going to hike. We don't know if it's July or September when they want to hike. If they don't hike in July, they lose credibility. In June, people will give them a pass. June will be a 'hawkish' skip where they signal they were very close to hiking.
That would create a risk-on move into next week which would take some pressure off of the Fed. I think that everyone's on edge because of what has been happening lately with central banks not being able to hit the mark and delivering what markets have been expecting.
It's a central bank-a-palooza. In many ways the Fed has the benefit of going last in the sequence of central bank activity. If the ECB does it right, and the BOJ threads the needle enough to make sure people don't get confused, the Fed can come in and be reasonable.