Two months ago, Fed's Bullard went full hawktard and implicitly told bondholders to "sell, sell, sell." [5] As we explained here, there was a hidden motive for his demands - the bond market was breaking bad [6]. So, perhaps it is not a total surprise that on the week when Treasury "fails to deliver" break back above $1bn to 2-month highs (broken market), that Jim Bullard is back:
- *BULLARD SAYS MARKET TRADING 'TOO DOVISHLY' COMPARED TO FOMC, TIPS REAL RATE `SHOCKINGLY LOW'
- *BULLARD SAYS HE SEES FIRST RATE RISE AT END OF 1Q 2015
As Renaissance Macro's Neil Dutta adds, confirming Bullard's meme, while recent moves in 10Y USTs have been driven mostly by geopolitical concerns and softening global economy, "we suspect that there may be a misreading of Fed policy." Or 'the market' knows full well how this ends?
Bullard:
- *BULLARD SAYS HE SEES FIRST RATE RISE AT END OF 1Q 2015
- *BULLARD SAYS CASE FOR END-1Q RATE RISE IMPROVING AS JOBS GAIN
- *BULLARD SAYS MARKET TRADING `TOO DOVISHLY' COMPARED TO FOMC
- *BULLARD SAYS MARKET STABILITY AMID QE TAPER HAS BEEN SURPRISING
- *FED'S BULLARD SAYS 10-YEAR TIPS REAL RATE `SHOCKINGLY LOW'
AndRenaissance Macro's Neil Dutta confirms The Fed's narrative...
“If you take the bond market’s message at face value for most of this year, it’s basically telling us the Fed is going to start tightening policy long before the economy heats up. This is why the short end of the curve has been selling off even as the long end has rallied”
The bond market is now fighting the Fed
“That is at odds with the Fed’s guidance. The Fed wants to see the economy heat up and the bond market is not aligned with the Fed’s views”
But the real reasons... surprise...
The Bond market broke again... (via Bloomberg)
Repo 10Y Fails to Deliver Rise to Two-Month High
[7]
10Y fails to deliver rise to $1.09b vs $55m in week ended Aug. 6, highest since June 11
3Y fails to deliver $689m vs $10m, highest since Dec. 11
And in another odd deja vu moment... stocks and bonds have massively diverged (just as they did last time Bullard spoke) [6]
[8]
* * *
So bonds (rallying) are 'fighting the fed' and small-cap tech stocks (rallying) are 'fighting the fed' - seems like the fed communications channels are breaking...
