EuroDollar

Forget Hikes - Rate-Cut Odds Soar For September As NIRP "Bets" Hit Record High

Despite a modest bounce today, the collapse in stock prices and bond yields since the 'non-event' "won't affect our market" Brexit vote has sent market-implied rate-hike odds careening lower. In fact, there is now a 0% chance of a rate hike to November and a 23% chance of rate-cut in September with December (post-election) rate-hike odds just 7.7%!!! Fed Credibility is official dead...

Fed Credibility Collapses - Rate-Cut Now More Likely For Next Year

Just when you thought The Fed's credibility could not drop any further... it does. For the first time since the financial crisis, the market now sees a greater probability of a rate cut than a rate hike... for the next year. In fact, "bets" on an eventual dip into NIRP have surged to record highs, and we suspect even higher today...

The Complete Fed Preview (Or Why The Dollar Is Falling)

While The Fed is a "motivated rate raiser," it appears that they are losing confidence in their growth forecasts, which means, as Goldman Sachs notes, another downgrade to the long run rate tomorrow, bringing the cumulative reduction in the Fed’s tightening cycle over the past year to 75 bps. There is a good chance the market will see this as a signal to sell the Dollar, on the grounds that the Fed will look increasingly uncertain over the medium-term trajectory of policy.

"Dovish" Fed Expectations Collapse To Lowest Since 2015

Back in the middle of February - during the height of the financial-market turmoil, the market was pricing in a shockingly policy-error-ish 36.5% chance of a rate cut in 2016. Since then The Fed has done everything it can to try and regain credibility - attempting to be hawkish in the face of dismal data, baffling everone with bullshit, and droning on about data-dependence. Now, thanks to the FOMC Minutes released last week with officials suggesting investors may be underestimating the pace of tightening, the odds of a 2016 rate cut have collapsed to just 4.8% - its lowest since New Year's Eve.

With 'Recovery' Disproved, There Is Every Need To Examine The Worst Case

There is a great deal that is wrong with mainstream economic commentary, starting with its unwavering devotion to orthodox economics and unshakable faith in their “stimulus.” No matter how little is actually stimulated there is never any doubt that the media will simultaneously forget the last one while lavishing praise on the next one. It is, however, the actual economic commentary itself that may be the most damaging. Because nothing works, every news story is printed from the shallowest, narrowest perspective. It is a grave disservice to the public and journalism.

Citi Warns "Something Seems To Be Going On Here" As Rate Hike Fears Storm Back

"It is hard to deny that there seems to be something going on here. It could either be a bored market triggering a momentum trade that feeds the narrative or it could be the market has sniffed out a change of tone from the Fed as these new Fed events get scheduled.... With the Yellen speech not coming until June 6, and the UK Referendum a week after the FOMC, I can’t see much logic to a June hike. Hiking a week before the UK vote seems like a totally unnecessary risk that this extremely risk-averse Fed would never take. But July makes perfect sense if they want to get a hike out of the way before election mania."

'Transitory' Excuses Destroyed As Mainstream Wakes Up To Crashing Yield Curve

The US Treasury yield curve is flattening again, with parts finally in 2016 surpassing the bearishness exhibited to start 2015. The mainstream is just now starting to notice likely because unlike last year there are no longer credible excuses to simply wish it away. “Transitory” is not a word you find much anymore, replaced instead by reluctant and forced acknowledgement that there is real economic peril here. Bearishness in the yield curve is not something new, however, only the notice of it.

Waves Not Solid Cycles - Echoes Of 2008 Warrant Worries

The current rash of cautious ignorant optimism is so very reminiscent of the period right after Bear Stearns in 2008. Ben Bernanke as late as June 2008: "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." Janet Yellen said, “the strong incoming data on spending eased my fears that we are in or are approaching a recession regime” before expressing confidence in rate hikes starting in December 2008! The mainstream takes the absence of further liquidation as if there will be no more liquidations when in fact the likelihood of more of them only rises the more they are artificially “contained.”

China Trade And The Inevitability Of Systemic Reset

The reset is the answer, not the problem. Delaying the answer only elongates the pain of the problem. Under the direction of orthodox economics (the fusion of Keynes and monetarism) the world’s “stimulus” apparatus is making a bad situation worse by (at best) dragging it out far longer than maybe it would have under more traditional business cycle conditions. Belief in the power of “stimulus” to make it happen prevents awareness of what is, again, really a paradigm shift that will not be altered. What we are analyzing, then, is not what awaits but how long it takes to get there and the huge, growing costs to delay what looks only inevitable.

Presenting The "Boiling Frog" Slowdown

Whenever the topic of recession comes up, the mainstream and especially economists (redundant) become quite defensive about the possibility. Just a few days ago, presidential candidate Donald Trump claimed the US was headed for “a very massive recession” and that it was “a terrible time right now.” The Washington Post, as you would expect, was skeptical of the claim because orthodox economics will have none of it, writing that Trump is “embracing a distinctly gloomy view of the economy that counters mainstream economic forecasts," because there is no obvious recession, only unexplained (to the mainstream and economists) slowdowns, nobody feels the boiling water...

Bets On The Fed Going 'Negative' Are Soaring

As we detailed initially here, and followed here, there is a clear and present danger - no matter what the vareious Fed speakers say - that The Fed will be forced into negative rates sooner rather than later. The market appears to be losing complete faith in The Fed's current narrative as bets on NIRP have reached record levels - with 2017 now more likely than 2016 (QE first?).

It Was Never About Oil, Part 2: It Was Always Leverage & Volatility

Unfortunately, we remain stuck in the cleanup phase so long as economists and their ability to direct policy continue to suggest the Great Recession was anything other than systemic revelation along these lines; a permanent rift between what was and what can be. It is and was never about oil; only now that oil projects volatility into the dying days of eurodollar leverage.