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Updated at 7:30pm, April 18, 2017
BREAKING: *JAPAN’S 10-YEAR BOND YIELD FALLS TO ZERO, LOWEST SINCE NOV. 16
U.S. 10 Year Treasuries surged to fresh 2017 highs after Friday’s soft economic data and testosterone filled rage coming at markets out of the North Korea.
Market Participants Growing Doubt over the Fed’s Rate Hike Plans
Bond futures players have grown more skeptical the Federal Reserve will raise interest rates aggressively this year. The Fed’s dot plot, central banker’s view on future hikes is up at two more for 2017. Implied rates on the fed fund futures curve are fully pricing in a September rate increase, with only a 20% percent chance of another by year-end. Bottom line, the spread between market participants and Fed governors views on future rate hikes has widened dramatically. Special thanks to Bloomberg’s Alexandra Harris (chart above).
New Highs for Unloved Bonds
Overweight bonds, gold miners and emerging markets; we’ve done a solid job from clients in 2017. This week we’re focused the 50 percent retracement of the Trump Reflation Trade selloff at 2.178%.
All those “bond bears” have been hit with some heavy punches in recent weeks, a short covering capitulation climax is near.
1. A Dovish Surprise Fed Meeting with no movement in the Dots.
2. Paul Ryan’s Fumble – ACA repeal vote failure in the House, Tax Reform curveballs from Washington.
3. FOMC’s Dudley Bloomberg interview on the Fed’s balance sheet.
4. Soft March Jobs data.
5. Mother of all Bombs in Afghanistan, U.S. Missile Strikes in Syria, North Korea-Trump testosterone filled Verbal Slugfest.
6. Friday’s Colossal CPI, Retail Sales miss.
Pick up our latest note here:
“There is a disconnect between the Trump stimulus execution risk and how far we’ve come in terms of expectations. An actual fiscal boost is more than 12 months away in reality, Obamacare took well over 300 days to land on the President’s desk while the Dems controlled the House, Senate and the White House. As much as well all want to believe Mr. Gridlock is dead, he’s still breathing. As we head into 2017, gold miners, bonds, gold miners and utilities continue to be our favorite options as the street has unanimously bought into the “reflationary trade” narrative.”
The Bear Traps Report, January 5, 2017