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The Sellside Reacts: "December Liftoff Is A Lock" But "There Is No Such Thing As A Dovish Rate Hike"
The sellside reactions come tricking in. Here is the first one from Citi's Steven Englander"
Blowout earnings and NFP -- makes December the default and raises questions on steepness of the path
Smashing NFP brings 12-mth average to 235k
AHE at 2.5% y/y, the highest since 2009, no other point has been higher than 2.3% y/y
This pretty much makes December the default barring very surprising weakness in incoming data.
The problem with AHE is that in the past there has been very significant negative autocorrelation, so a very strong number has been followed by downward revisions or a weak outcome. However, if a 2.5% is confirmed next month it has huge implications because it would suggest that the NAIRU was probably somewhere in the 5 1/4% - 5 1/2%. Given the momentum in the labor market it would mean that the Fed would have to move to neutral quickly, and presumably that is a lot higher than 12bps. Still speculative, but a lot will ride on AHE next month.
So far, FX market is not making big distinction between FX and EM. With ECB ease expected, EUR trading with EM is to be expected. Weakest currencies are NZD, NOK, EUR, AUD and ZAR. Outperformers are INR, CAD (good payrolls), BRL, MXN (spillover benefit?) and JPY. S&P futures down about 0.4% since the release.
Barring disaster, this makes December liftoff a lock. It won’t stop the FOMC from being very dovish sounding and reiterating the commitment to a very slow path, as Evans did on TV a few minutes ago. The question is whether the market believes them if the numbers keep coming in on the strong side.
Jan 16 fed funds futures now at 30bps – assuming 85-90% liftoff chance now being priced in, this would suggest market will expect fed funds to settle around 32-33bps right after liftoff.
Some other reactions:
Here is Deutsche Bank warning there is no such thing as a dovish rate hike:
This is good news for Janet Yellen, since it is the kind of data that makes the decision easy and will not challenge her credibility when she pulls the trigger. The dollar-positive implications are similarly obvious. The less obvious trades surround equities, because this data raises questions on just how gradual the Fed tightening cycle will be. Certainly it is inconsistent with 'the one and done' thinking on the Fed. The data instead fits with the slogan: 'there is no such thing as a dovish Fed rate hike'.
But to Brown Brothers, it is all smooth sailing from here:
It is difficult to find the cloud in the silver lining as economists are often wont to do. It leaves no doubt about the December meeting being live despite the year-end considerations that some had seen tying the Fed's hands.
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the fed is all excited about a bunch of shitty jobs. what a farce.
you really need to do somethnig about that profile pic of yours
"Barring disaster?" Luckily for the Fed, there's an infinite number of disasters just waiting to happen.
It is amusing watching them manage expectations to such an extent, though.
The Fed should stop all financial excrements and force the Congress’ fecal discipline. ;-)
Looney
Japan tried the same thing in 2000 and 2006.
Where are JGB rates today?
http://goldsilverworlds.com/wp-content/uploads/2014/12/Japan_interest_rates_1972_2014.jpg
We may not know what route the Fed will take, but we are certain of their distination:
NIRP
The Farce Awakens
May the Farce be with you.
uh oh. Farce. (rainman).
Lock my ass.
Best possible news. Now if november will be bad and they won't raise rates gold should skyrocket
Wait, did he say "blow-out" earnings? What fucking planet do these douche-bages live on?
faceplanet. there's only one stock there.
Here's some ' very surprising ' weakness in incoming data : Collapsing Xmas retail sales !
Just do it , Granma !
Should I hold my breath this time?
I'll believe it when I see it... Though I will admit if the impossible becomes possible I sincerely hope that this is the time they finally lose control. If they spark a deflationary sell off (which is coming eventually anyway) maybe the confidence game will finally be broken and further ZIRP, NIRP and QE will be futile.
.25% can't wait to go bankrupt!
So has the FED done its job today? how many are capitulating and selling the metals off today at a loss? come clean. ( This is of course if you need or want the money )
The charades continue. Rate Hike will never happen.
complete gibberish.
you are better off listening to the drivel emanating from the Kardashians.
But, but, but.....I thought the Fed was never going to raise rates in The Bernank's lifetime!!!!!!!!!!!!!!!!!!!
Did The Bernank expire overnight? US equity markets don't seem to care too much at the open. Looks like the EM
short is back on the table along w/ the USD long. EUM cleaning clock! Yaaaa baby!
Isn't this back-n-forth rangebound trading fun? Gold was getting shellacked as was silver.
I'm feeling in a Motown mood:
Martha and the Vandellas: https://www.youtube.com/watch?v=17yfqxoSTFM
Nowhere to run to, baby; nowhere to hide.
The Fed will prop up the stock market inducies and treasuries no matter what happens with rates. Nothing is going to change at all. Why would anyone think they are just going to admit they are morons and walk away from their fraud now? Rates do not matter. Prices are set where the printing press wants them. We do not have a market, and I think people should stop acting as if we do.
Rate hike will make $ too strong...?! :O
Let me see if I'm keeping an accurate tally.
Better than expected Jobs number equals more likely December rate hike;
Bonds crushed, yields soar across the curve;
USD posts immediate huge gain as Yen and Euro are crushed;
Gold and Silver both hammered 2%+ lower;
US Stocks... unchanged
A lock.
Bullshit.
I'm sure the Yellen voicemail inbox will be too full of threats for the hike to happen.
Fucking circus clowns the whole lot of 'em.
Cue that circus music once again. Wait. It never stopped. Nevermind.
Thirty years ago, the Fed mantra was two steps and a stumble. What is amusing to me, to the extent I can keep a smile while watching my gold get hammered, is that the objective reality is that rates are a) zero, b)expected to rise all of 0.25% and c) not expected to return to normal for years. That is an incredibly easy monetary policy in an environment where other central banks are engaged in QE and negative rates. People are delusional...they're acting like the policy is tight. The real problem with the markets is not the Fed, it is the economy, which has basically collapsed. The jobs numbers are ludicrous...totally at odds with what the rest of the data are suggesting.
the FED won't raise interest rates, not until the next Republican president
If they do they will throw Negative rates a week later
step one: announce the goal of 2% inflation has been attained (for this they may have to fudge the numbers a bit on the upside)
step two: after announcing 2% inflation you raise rates 1/4 point.
step three: try to keep a straight face
Don't people need jobs and money for there to be a liftoff, or will bitcoin speculation save them?
NIRP