Traders Now See Rate Cut More Likely Than Hike In 2020

While all eyes have been on the longer-end of the yield curve - as it collapses ever closer to recessionary-signaling inversion - traders have, for the first time since the financial crisis, inverted the eurodollar curve - implying a rate cut is more likely than a rate hike in 2020.

Most investors have grown used to watching the '2s10s' or '5s30s' curves which have collapsed in the face of an endless barrage of global synchronous growth 'goldilocks' bullshit narrative...

 

But, as Bloomberg notes, the spread between December 2019 and December 2020 eurodollar contracts fell below zero Wednesday for the first time, suggesting short-end traders don’t expect the central bank to raise interest rates at all after next year.. and in fact, are pricing in a higher probability of a rate cut.

 

The spread’s dip into negative territory is the culmination of a trend months in the making as investors bring forward their expectations for when America’s economic expansion -- and therefore the Fed’s tightening cycle -- will end.

It contrasts with the most recent summary of economic projections, which shows that a majority of officials expect to hike rates once or twice in 2020 as the gap between The Fed's hopes and The Market's reality has never been wider...

The divergence between trader and policy maker expectations is partly a product of contrasting views on whether productivity gains are set to drive further growth, according to TD Securities rates strategist Gennadiy Goldberg.

“The Fed expects productivity to pick up gradually in the coming years, raising the neutral rate,” said Goldberg. “The market appears to be taking an ‘I’ll believe it when I see it’ approach.”

Finally, we reminder readers that as the short-end of the market inverts, suggesting the end of the tightening cycle is appreciably sooner than The Fed 'no recession in sight' hopes would assume, bond speculators are still convinced that higher rates are coming and have never been more bearish of bonds...

 

Maybe Dr.Copper is on to something after all...

The Eurodollar curve is shouting loud that a recessionary impulse is coming soon and The Fed will have to admit it failed again.

Comments

gdpetti Money_for_Nothing Thu, 07/12/2018 - 15:43 Permalink

Traders expectations are manipulated towards what those in control of the system want them to be... Will the Fed 'pull the rug out'? now or later.. time is running out... 'out with the OWO, in with the NWO', is the engineered global regime change op playing out.... Seems to be hike, but I'm not in a position to care anymore... not my game to play... but as the song goes: ''You don't always get what you want... you get what you need". So, what do the traders 'need'? What does the puppet masters in the SG want them to think? Usually, its a game of faint.. fake them out.... be it the markets, military or any imperial situation.... seems the market is ripe for the Fed to 'pull the rug out'... but that could be tied in to all the buybacks from the corporations as well.. and how much longer will that take to complete? Even if it's another 6 months or so... now the situation seems ripe for a rate hike... a small one... keep the hands on the rug nice and tight.

In reply to by Money_for_Nothing

rejected Thu, 07/12/2018 - 11:00 Permalink

Central Banks have destroyed the worlds economic system. 

But that is necessary to install a new and improved world banking system.

The oligarchs more wealthy than they ever dreamed.

The goy? Not so much.

Blankfuck Thu, 07/12/2018 - 11:01 Permalink

YES WELL OF COURSE! ALL IS WELL IN FED FUCKTART LAND!

ALL GOOD FOR THE BILLIONARE BANKSTERS OF THE WORLD!

SORRY TO THE POOR POOR DEBT BURDEN, WITH THE PONZI PRINTED, ALL ON THE BACKS OF THE AMERICAN PEOPLE. ITS EVER-FOREVER IN THE LAND OF FUCKTARTS!

Consuelo Thu, 07/12/2018 - 11:13 Permalink

Wasn't this already baked in - build as much of a pad as possible so that there is something to cut when the time comes...?   Although 2% & change hardly presents a fat store worthy of getting a starving man through a winter of discontent.

Then again, why are we wringing our hands - we all know what's in store eventually from the Fed.

Ricki13th Thu, 07/12/2018 - 12:03 Permalink

The fact that everyone sees a so-called recession in 2020, makes me believe we are closer than it appears. 10y and 30y will invert by the end of August. The slowdown begins this fall, accelerates in Q4 as recession fears spike. Q1 GDP will be negative to mark the start of the next depression. 

TradingRat Ricki13th Thu, 07/12/2018 - 15:10 Permalink

I think we've already entered recession back in 2014, just look at the dollar all across the different currency pairs. The rates can go nowhere but to rise... the markets are going to force the rates to go up... when we have severe social political issues in Europe, America, and South East Asia, how does one can assume that the rates will go down?. Rates will rise as we will see much more crazy things unfold around the world, people are already starting to lose confidence in career politicians as we see the major political change in Europe. 

In reply to by Ricki13th