"News of new jobs is supposed to be great, right? So, what kind of weird world do we live in when it is considered horrible? Welcome to Fedworld where most market decisions are nothing but bets on what [the US Federal Reserve Bank, i.e., ] The Fed will be doing next with its free money for millionaires.
"Today we saw that in action as good job news kicked some reality into the FedMed-addled heads of investors about Fed tightening, which they have been denying all year. Suddenly, they realised they had a lot of catching down to do to align with a tightening target that readers here know the Fed has been heading to all along ... even before the Fed knew it. (Obviously, the Fed didn’t know it, given that the Fed has revised its tightening targets all along the way as these articles [here] said would happen.)
"While workers report in today’s survey that they don’t feel the [U.S.] job market is strong, the number of new jobs was high enough that it caused Treasuries to take a rocket ride up past 4.8% yields on the 10-YR bond. The 30-YR joined the move, also rising to its highest point in 16 years. All because those jobs means the Fed will going 'higher for longer.' ...
"'MarketWatch' reports that banks are now bracing for a recession. Two weeks ago, it seemed like everyone in the mainstream media, as I reported, believed there would be no recession and that a soft landing was practically certain. I stuck to my guns. Just like my endless refrain of “no pivot” to all the pivot heads last year, I’ve stayed with inflation is likely going to rise again, forcing the Fed to tighten harder into a deep recession, which means a lot more serious trouble ..."~ David Haggith, from his post 'It's All Coming Down!'
Wednesday 4 October 2023
News of new jobs is supposed to be great, right? So, what kind of weird world do we live in when it is considered horrible? Welcome to Fedworld, where market decisions are nothing but bets on what central bank will be doing next.
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This author of this piece is like a stopped clock. He knows not of what he's writing about even though some of what he says is (accidentally) correct. The Fed is not intending to pivot for the foreseeable future. That much is correct. Its reason has nothing to do with job numbers. His sentiments there are incorrect. The reason for the Fed's position also has very little to do with inflation (although that is providing cover for the Fed Chair to do exactly as he has been doing).
The increase in yields at the long end of the US Treasuries curve is also not related to jobs or job creation. The author needs to make enquiry as to who it is that has been manipulating the US Treasuries market in an attempt to protect the ECB. A firming of the long end is a sign that the entity is losing control of the yield curve. Hint: it isn't the Fed that has lost control. The Fed seeks a normalised yield curve and is steadily getting its way.
The author needs to look carefully at the spread between the German and US 10-year. Watch the trend. Why consider lending to Germany as lending to a developed nation? In reality the risk is similar to lending to a third-world nation (same as much of Europe, pretty much all of it really). Where is the collateral for the loan? What do they have to offer? How are they (the German govt) going to service and repay the loan? Watch the spread alter as this becomes understood.
He needs to learn the profound significance of the elimination of LIBOR from the US domestic loan markets and its replacement by SOFR.
The Fed is at war. It is existential. The enemies are ECB, Bank of England, European shadow banking, European old money, Eurodollars, shitcoins, all synthetic dollars wherever they are and the derivatives therefrom.
Don't watch a stopped clock.
Jay
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