Last quote by Ian Lyngen
Ian Lyngen quotes
The world is coming to the realization that politics in Washington could delay any economic impact from Trumponomics.
The response to Trump provided the Fed enough cover to move forward with the process of normalization. There are clear worries about the secondary impact of what a tighter monetary policy is going to do.
When we got the Trump victory we saw a sharp rally in Treasuries that was very short-lived and then this massive sell-off. The sell-off is a function of inflation expectations. It highlights the risks of a move toward protectionism; it highlights a lot of the traditional pro-business GOP platforms.
We're in the process of consolidating and establishing a range within this new higher yield environment. It's not exciting, but given the magnitude of the move we've seen, this is relatively normal for the Treasury market.
This is a very significant move.
The typical indirect buyer was more cautious at today's auction in light of the recent backup in yield and the near term uncertainty associated with the new president.
The markets are scared you could see a material tightening of financial conditions without the Fed doing anything.
You do have a presidential election that could in and of itself tighten financial conditions. I'm not quite surprised by the lack of interest in the employment series.
We do not think they have to change the statement in any meaningful way. If there is a change, it will most likely be to the hawkish side and hint that the Fed is on track to follow through with their rate hike in December. We don't think they'll actually say 'next meeting,' but that's the risk.
We're assuming the Fed makes some tweaks to the language but does not explicitly put the form of a calendar guidance into it. I don't think they need to. If you look last year at this time, the market was only pricing in a 37 percent chance of a hike in December. It seems like there was a need to be more explicit.
We could do it tomorrow if we get a strong GDP number. That's well within the range of possibilities.
The magnitude of the yield move was not particularly striking, but it was the fact that it challenged every meaningful support level with little in terms of fundamental impetus.
To break out above 2 percent, we need to do some significant consolidation and build a good volume base between here and 1.89. That was the top of the range that was in place in late spring this year.
I think that uncertainty about what the Fed statement next week is going to look like added some marginal caution to the two-year auction.
What they did in 2015 really sets up next week's meeting to be a more potentially tradeable event than the normal kind of sleepy event that we might have otherwise expected it to be. When you have an event where there's a large enough divergence of opinion, the price action surrounding the event can be decisive. …They definitely lay the groundwork for a tightening in December at next week's meeting, and that definitely has bearish implications.
Last week, Treasuries rallied because Chinese stocks fell and today Chinese stocks fell, but we didn't rally, suggesting the panic from last week seems to have subsided.