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The Taper Morning After: A Full Summary Of What "They" Are Saying

Tyler Durden's picture


Strategists were largely wrong about the yes taper in September, and then they were just as largely wrong about the no taper in December, and yet their opinion is just as largely gospel and people continue to listen to them (what else is there to be distracted by in a still very much centrally-planned market and economy). Which is why the below summary by Bloomberg of what global financial strategists and investors, also known as "they", are saying about how to trade assets in the post-taper world, should probably be taken, largely, with a grain of salt.


  • Fed taper leaves USD unattractive within G-10; USD isn’t expected to appreciate in 2014, Thomas Kressin, head of European foreign exchange at Pimco, says in interview
  • EUR, GBP and Scandinavian currencies to remain strong vs USD in next 3 to 6 months
  • Fed balance sheet will keep growing next year while ECB balance-sheet has been tightening so far


  • Fed taper won’t be big shock for bonds as still plenty of easy money in global financial system, Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, says in e-mailed note
  • Doesn’t mean rates won’t rise over time; 10Y UST yield may inch up to 3.25% by mid-2014
  • Spread sectors such as high yield, commercial mortgages, other asset-backed bonds and longer-dated municipal bonds are still better bets than USTs


  • Fed taper isn’t a game-changer
  • Look for EUR/USD, GBP/USD or AUD/NZD decline to reverse, writes Robert Lynch, currency strategist at HSBC
  • Key is extent to which Fed’s new dovish forward guidance remains credible


  • CHF is likely to weaken as Fed tapering encourages investors to unwind safe-haven positions, Beat Siegenthaler, a currency strategist at UBS, says in interview
  • Main point for market was Fed’s dovish overall message on interest rates

Morgan Stanley:

  • USD/JPY may hit 105 before year-end on Fed tapering, as risk appetite is well-supported, Morgan Stanley analysts led by Hans Redeker write in note to clients
  • Dovish statement and enhanced verbal guidance offset modest tapering


  • EUR/USD unlikely extend losses on Fed taper unless 2Y UST yield rises to 0.5%, Kit Juckes, strategist at SocGen, writes in e-mailed comments
  • Look for levels to long USD vs CAD, AUD and JPY

Credit Agricole:

  • USD to firm against yield-sensitive currencies after Fed starts tapering, Credit Agricole strategists including Mark McCormick say in client note
  • USD positions aren’t stretched; favors USD vs JPY, AUD and NZD

BNP Paribas

  • Fed decision bodes well for USD into early 2014 and should lead market participants to rebuild USD longs that were unwound after Fed failed to taper in September, BNP Paribas strategists led by Steven Saywell write in note to clients
  • Maintains short EUR/USD trade recommendation
  • Potential for further USD/JPY gains on positive reaction in equities
  • Rates: Fed decision will have major implications for euro govt bonds; no decoupling from USTs and core govt bonds
  • Credit: Spread compression regime for European spreads remain in place after Fed taper; short end of rates curve anchored by forward guidance and potential orderly advance of yields at long end, Gregory Venizelos, a strategist at BNP, writes in e-mailed comments

Standard Bank:

  • USD/JPY may extend rally after Fed tapering as stock of assets held by Fed is still rising, Steven Barrow, head of G-10 strategy at Standard Bank, writes in note to clients
  •     Fed decision doesn’t change the equation too materially for major currencies USD/JPY targets 120 in 1-2 years; EUR/USD to push to low 1.40s while GBP/USD may trade into 1.65-1.70 range


  • ‘Risk-on’ Fed taper may spur tightening periphery
  • Strong relationship between risk markets and Italian, Spanish spreads


  • Fed taper favors steeper curves and 5Y periphery as bond market largely discounted Fed’s actions amid stable UST yields
  • Investors should be buying USTs at 3%
  • Gilt underperformance can be driven by U.K. economic outperformance; short 5Y/5Y GBP vs USD


  • Near-term relief in USTs would be selling opportunity as 10Y yields should clear 3% amid curve steepening
  • Reiterate 10Y UST/bund widener as spread should stay above 100bps and edge higher

Source: Bloomberg


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Thu, 12/19/2013 - 07:58 | Link to Comment GetZeeGold
GetZeeGold's picture



Relax princess......we're still printing.


Go around back....we'll fix you up.

Thu, 12/19/2013 - 08:12 | Link to Comment Stackers
Stackers's picture

I prefer to take my financial advice from "some people" instead of "they".

Thu, 12/19/2013 - 08:21 | Link to Comment jaap
jaap's picture

Reverse Repo Time!!!

Thu, 12/19/2013 - 08:23 | Link to Comment slotmouth
slotmouth's picture

Just sell the goddamn yen already.

Thu, 12/19/2013 - 08:24 | Link to Comment XAU XAG
XAU XAG's picture


Thu, 12/19/2013 - 08:34 | Link to Comment XAU XAG
XAU XAG's picture

After pumping 85B into the economy................he still cannot get it pregnant.

He may as well been wearing a rubber (oh he was as it only went to the Blanks!)

Withdrawing 10B without IVF..............still wont work


Although he has got the economy pregnant on has not managed to go to it's full term.


Why they don't cut taxes to get the economy moving is a mystery.........................

Thu, 12/19/2013 - 09:48 | Link to Comment mick_richfield
mick_richfield's picture

You're making it a mystery by putting your mental model before your observations.

They are not cutting taxes to get the economy moving, because their goal is not to get the economy moving.

Thu, 12/19/2013 - 08:13 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Yes..........but what does Goldman say?

<I live and (mostly) die by Goldman Sachs.>

Thu, 12/19/2013 - 08:19 | Link to Comment GetZeeGold
GetZeeGold's picture



They told me they think you're a Muppet.


I told them I thought that was a tad harsh.....and not very nice to boot.

Thu, 12/19/2013 - 08:20 | Link to Comment cspg
cspg's picture

Goldman is restricted to comment. Conflict of interest.

Thu, 12/19/2013 - 08:25 | Link to Comment thunderchief
thunderchief's picture

Ben's gift box is complete and ready to hand off to Yellen as he rides off into the sunset of the lecture circuit, ivy league academia and Wall street jobs. Gold is smashed, tapering, robust economy etc..

Just remember Ben, it's just a gift box, beautiful on the outside and nothing inside.

Thu, 12/19/2013 - 08:22 | Link to Comment Ying-Yang
Ying-Yang's picture

$75 billion a month is still a shit load of QE

I am going to smoke 2 less cigarettes out of a pack. I am doing good!

Thu, 12/19/2013 - 08:33 | Link to Comment kralizec
kralizec's picture

You are, but you are hurting everyone else in the economy by your selfish act.  Stop that.

Thu, 12/19/2013 - 08:39 | Link to Comment Ying-Yang
Ying-Yang's picture

May I blow electronic water vapor your way?

Thu, 12/19/2013 - 08:47 | Link to Comment IdeasRbulletproof
IdeasRbulletproof's picture

Depends. Is it Corzined based?

Thu, 12/19/2013 - 09:52 | Link to Comment ejmoosa
ejmoosa's picture

So if you cut your kid's allowance from 850$ a month, to 750$ a month, how convincing would you be to your friends that you kid has improved and is able to get by on his own?

How convinced would your kid be that you are no longer willing to support him?


Thu, 12/19/2013 - 08:19 | Link to Comment alexdg
alexdg's picture

75B a month is really bearish for gold. I might add that it is probably more bearish than 65 or even 55B a month, or maybe no QE at all. I'm pretty sure that no taper would also be bearish for gold. I might also add that adding more QE would definitely be bearish for gold.

Thu, 12/19/2013 - 09:39 | Link to Comment The Mist
The Mist's picture

You know it's a healthy  market when everything leads to a bullish environment for stocks!


To the moon! No crash, this time it's different!

Thu, 12/19/2013 - 08:19 | Link to Comment stocktivity
stocktivity's picture

Blah, blah, blah, and more blah. It's all Bullshit!!!

Thu, 12/19/2013 - 08:21 | Link to Comment GrinandBearit
GrinandBearit's picture

Just a house of cards and they keep adding more cards. 

Interest rates are getting away from them.  Today the 10 year yield should hit 3%.

The Fed is losing control.  It's only a matter of time.

Thu, 12/19/2013 - 08:31 | Link to Comment Ying-Yang
Ying-Yang's picture

10Y is currently 2.88

Hitting 3 today would be.... odd

don't think TPTB will let it happen just yet

Thu, 12/19/2013 - 08:32 | Link to Comment kralizec
kralizec's picture

Crept up to 2.91.  Lets see if there is anything left in the hat to stay below 3.

Thu, 12/19/2013 - 08:51 | Link to Comment NoDebt
NoDebt's picture

There is a school of thought that says the Fed can not affect long term interest rates.  Not saying it's a theory I subsctibe to, but there is one.

Thu, 12/19/2013 - 10:25 | Link to Comment Ying-Yang
Ying-Yang's picture

10Y is currently 2.94 +3.48%

I remember a good article by one of the Tylers saying 3.5% will start a disorderly rotation...

Thu, 12/19/2013 - 09:16 | Link to Comment dcj98gst
dcj98gst's picture

May take a couple weeks but well will hit 3.0% soon.

Thu, 12/19/2013 - 10:11 | Link to Comment ElvisDog
ElvisDog's picture

And that may be the whole point of this taper exercise - to see what the effect on long term interest rates is from a modest $10B reduction in QE. It may be an experiment.

Thu, 12/19/2013 - 08:22 | Link to Comment GrinandBearit
GrinandBearit's picture

Just a house of cards and they keep adding more cards. 

Interest rates are getting away from them.  Today the 10 year yield should hit 3%.

The Fed is losing control.  It's only a matter of time.

Thu, 12/19/2013 - 08:27 | Link to Comment fonzannoon
fonzannoon's picture

The 10yr is going to go between 3.3% and 3.5%. All part of the plan.

Thu, 12/19/2013 - 08:36 | Link to Comment stant
stant's picture

then the plan is war

Thu, 12/19/2013 - 08:40 | Link to Comment new game
new game's picture

fonz please explain if you have a momoment. I am of the opinion that the fed will buy like hell short dated and hold long to maintain 3...

Thu, 12/19/2013 - 09:06 | Link to Comment fonzannoon
fonzannoon's picture

hey new game. give me a few mins and i will give it my best shot

Thu, 12/19/2013 - 09:11 | Link to Comment XAU XAG
XAU XAG's picture



make it on target!

Thu, 12/19/2013 - 09:17 | Link to Comment new game
new game's picture

tia - look to new posts by tyler to see your comments.

the 10 year is the crux- you are keeping your eye on the ball.

bigest mover in econ - real estate

was RE broker for over 20 years

fed needs this faux RE echo bub to carry on

thoughts are carry long dated to flaten curve and keep the shit train on tracks...

wild card is china and demand whilst congress spends with no market inposed constraint

fed can only juggle this imbalance so long b/4 market imposes higher rate.

cash will be king in this case if true and goes that way...

gold toast no matter what for next 6 months

gold will become buy of decade within year...

Thu, 12/19/2013 - 09:22 | Link to Comment XAU XAG
XAU XAG's picture

gold toast no matter what for next 6 months

gold will become buy of decade within year...


I agree

The rest is above my pay grade LOL


I am concentrating on G/S


Thu, 12/19/2013 - 09:53 | Link to Comment fonzannoon
fonzannoon's picture

New game the key here is that all asset classes have to be considered unsafe so everyone piles into the S&P so we can truly achieve the wealth effect. They had done a great job of beating PM's to death but bonds were holding up just fine. As an asset manager I was just fine keeping grandma in a bond fund and some div payers. So was everyone else. 

The other key here is the end game for the fed is to own the bond market. They can and will never unwind this. So This year they finally took David Einhorn's advice "If the Fed's hope is to drive investors into equities, propping up the bond market is counter-productive. While there are many parts of the cycle where higher bond prices fuel higher stock prices, at this point in the cycle the relationship has reversed. In recent months, stocks and bonds have developed a strong negative correlation -- what is bad for bonds, is good for stocks. The Fed does not understand investor psychology: If you want to get people to sell bonds and buy stocks, the best way to do that is to show them that bond prices can, and do, fall."

So as we start the new year the fed will knock that yield up over 3% and probably to 3.5% to roast grandma's ass one more time and remind everyone that the bond market (and by extension div payers) are not the place to be. This will once again barf up collateral for the fed to grab. It will pump up the S&P as well.

At the same time the fed will quietly sweep up moar and moar of those treasuries (now 75 bil a month) even while stupid people think they are reversing course. They already own a third and it won't be long before they own half.  Let me finish this with a message I got yestereday from the person who truly clued me in to the big picture when the fed made their move. No offense to ZH, but this person clearly disagrees with the main premise here.

"anyway, lol, no this does nothing. I just always knew they would use the next opportunity to send a mixed signal (ie, taper mortgage but forward guidance/long term rates) and I also thought it wouldnt be march because it was just too expected. So this was a good opportunity, i wasnt betting on december, but im not the least bit surprised, that way the Bernank can act like he set the undoing of all this in motion when 6 months from now on a huge job miss we go to $100b on yellen. Ultimately though, this just proves what ive been saying all along: it is stock, not flow. Nobody seriously doubts they are not going to get to 51% of USTs because of this taper... its a mere $5bil off the bond side and will hardly reduce their 0.2%/week absorption rate. Me, I woulda cut it all from the mortgage buying as those things have nearly dried up anyway, but I guess what was important to the Fed was making sure the forward guidance wasnt becoming a joke. Well done
overall, everything is still on autopilot, bonds are doing their sideshow cracking up to the 3.5% redline, stocks are acting as though the Fed just gassed it some more (which they basically did w/ that 6.5% unemployment number, hell they might as well just say 0%), and FX didnt even notice beyond a brief epileptic seizure. 

Autopilot is as intact as ever and lo and behold not a single person has noticed on ZH that the "flow" was just reduced and stocks didnt give a SHIT, hence destroying utterly the Tyler's argument that once the flow dries up its all over. The "markets" are on autopilot and anyone who can do arithmetic at this point realizes no matter what happens to the "flow", the stock will reach 51% soon enough from the current 33%...

Thu, 12/19/2013 - 11:13 | Link to Comment Variance Doc
Variance Doc's picture

I disagree with your take on the “stocks vs. bonds” and “stock and flow”.

The stock market is a just a secondary phenomenon from the main show, which is to keep the current (last 125 years really) power structure/system afloat.  First and most important, they need to keep the fiat (FRN, debt-money system) alive and the most important component of that IS the flow.  Remember, the FRN on paper is merely the manifestation of some debt somewhere else.  Without MORE borrowing in the future, the interest owed on the debt that created today's money can never be paid.  Or, it can, but then there is inadequate remaining money to repay the principal.  Keep in mind the exponential function!

As I said many, Many, MANY times, this is very simple math.  Printing money is the only way to solve this math in a finite world...literally, it is.  Ben and Mrs. Debtfire have to print the coupon because there is no credit growth that can pay it!

If P is outstanding now, and P+I is owed one year from now, SOMEONE *must* borrow that extra I in order for it to EXIST in a debtmoney system.  If nobody does, the entire system is in default.  So Ben and Mrs. Debtfire has printed up I.  This is one component of the *FLOW*. It is either that or FRNs snuff themselves out of existence and cease becoming money, and thus the current power structure/system will die.

Also, you are forgetting the host: the US government.  They are spending over 1,000,000,000,000 in excess of what they steal in taxes.  The fed has to keep the host alive by reducing interest rates (there’s that math again with exponential functions…), so the host does not die.

I think the “tapering” is just misdirection (smoke and mirrors).  Given the above, they HAVE TO print more and more and more….  They will print ‘till the world loses CONFIDENCE in the dollar, and the system collapses.  This will be the key event in the process of destruction – the loss of confidence.

In short, it IS the flow that matters!!!!

Thu, 12/19/2013 - 12:27 | Link to Comment fonzannoon
fonzannoon's picture

Here Variance, is a response for you...

its funny this guy exemplifies the main problem with ZH'ers, they cannot give up on the hyperinflation side of the argument, because they literally cannot process the fact that debt isn't real.

"Remember, the FRN on paper is merely the manifestation of some debt somewhere else.  Without MORE borrowing in the future, the interest owed on the debt that created today's money can never be paid.  Or, it can, but then there is inadequate remaining money to repay the principal.  Keep in mind the exponential function!"

See that? Right there, he honestly thinks this whole thing works on honest accounting and that every right hand side of the ledger has to have a left hand entry to balance the books. The first step to understanding all this is that "debt" isn't debt at all because it will never be repaid. It is just an accounting gimmick, just a measurement, a way of putting a potential total figure on the aggregate money supply. ALL that matters is money velocity (well controlled) and the acceptance of the USD as a global reserve currency (also well controlled by the MIC). The jumping off point to understanding all this is the fact that governments do not pay bills by "borrowing" money nor by collecting taxes. They pay the bills by their monopoly on the printing press, which means they are first in line at the money spigot and then passing that inflation on to everyone else down the line. Taxes are there just to control inflation, ie to slow down money velocity among
income earners so that .gov can open the spigots to the free shit army.

Thu, 12/19/2013 - 16:04 | Link to Comment mkkby
mkkby's picture

Fonz, your friend is spouting the typical horse shit that all money managers and MSM spout to get the muppet masses long stocks.

However, I agree with much of what you wrote.  Taper can never end because the US gov will never stop spending.  They can't.  If they did GDP would crater.  As it is, I believe they intentionally spend more every year to artificially goose GDG on "their watch".  Remember, gov spending is a DIRECT ADDITION to GDP, so all you have to do is spend more to look like you're improving the economy.  No politician will ever cut spending on their watch.  They always want the other guy/party to do it.

As long as there is some carry currency at 0% interest, money will flow into stocks.  As soon as the yen or USD start rising, that will unwind.  That will happen if oil prices in local currency gets too expensive.  Watch that as a key driver.

Thu, 12/19/2013 - 11:36 | Link to Comment XAU XAG
XAU XAG's picture

Tanks fonz


Does my earlier post come into play re it's not really 3%


This is all a game of confidence to get peeps to feel confident and start buying and borowing


In the uk it's the housing subs buyers property gone up x%


next years prediction


And in the UK, house prices will rise by 8% in the country as a whole next year, and by 11% in London, according to the latest forecast from the Royal Institution of Chartered Surveyors (Rics). The rise is “largely down to the fact that buyer numbers considerably outweigh the amount of homes on the market” said the director of Rics, Peter Bolton King.



And I was calling for a bust in 2003 cannot have house prices increasing at 15-20% as they were and wages only increasing 2-3%


It's game back on for the housing market

"money for nothing" 

Untill interest rates rise


same old same old

Thu, 12/19/2013 - 08:38 | Link to Comment XAU XAG
XAU XAG's picture

If they own a large part of the market 


Just say 50% for ease


That means the real interest rate is they hand the interest back to the treasury.


Just thinking out loud!

Thu, 12/19/2013 - 08:39 | Link to Comment mayhem_korner
mayhem_korner's picture



Higher yield on the 10Y is the dart to all of the bubbles being blown.  Rising 10Y yields are not part of the plan unless the plan is to revert back to higher levels of printing (that will happen, but not because that is their plan). 

Thu, 12/19/2013 - 08:46 | Link to Comment new game
new game's picture

x x,

very astute obs. as rebate loop. but money goes to general fund i believe-think we can get in on the action-trans payment-oh, that right we are playing by the rules of worker surf-get back to work whitey! taxes to pay...

Thu, 12/19/2013 - 08:50 | Link to Comment XAU XAG
XAU XAG's picture

Many thanks 

new game

I am sure I read that they returned a large amount...........I know they did it in the UK.


Just showed the big ponzi for what it is.


Life would be grate if they handed back the interest on any loans you took out at the end of it's term.

One rule for them and another for us

Same as it ever was

Thu, 12/19/2013 - 08:39 | Link to Comment new game
new game's picture

prey, opps praying over 3% as cash will look real(estate) good...


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