Bonds!

[thowed]

It's up after hours, so possibly not.  But no idea how people will feel tomorrow. 

 

I think most people thought rates were going up, and it was contrarian to think he'd be dovish?  But maybe everybody was HOPING he'd be dovish, and so have been caught offside.

[TwoCitiesCapital]

On 4/28/2026 at 8:08 AM, TwoCitiesCapital said:

I think a 6+ month reversal in a multi year trend that was basically uninterrupted is more signal than noise

 

Let's add another two months to the trend. 

 

 

[rogermunibond]

What are people's expectations of the Warsh Fed?  If he wants Fed reserves to be at a much lower level, doesn't this naturally imply that he wants some form of interbank lending to take over the provision of liquidity?  And given the size of the liquidity need that's not even possible now.

[wabuffo]

I'll put a marker down and say he can't do it for reasons I've laid out before. 

 

But beyond on that, I'm not sure why this should even be an objective for the Fed.   

 

There's no upside and only downside since too many reserves isn't a problem, but even a tiny bit too few reserves and things immediately go haywire in the Fedwire payments system and the short-term interest rate the Fed is trying to control.

 

Meanwhile as the US (and global economy) grow(s),  the demand for central bank liabilities grows organically so any balance sheet downsizing objective has an ever so slight headwind.  

 

Bill

Edited July 7 by wabuffo

[tede02]

I'm increasingly looking for places to park cash while also focused on real yield and after-tax returns because my home state (Minnesota) has a high income tax. Just noticed that iShares rolled out a 0-1 year TIPS ETF (ICPI) late last year. Real yield on the portfolio is over 3% presently. I wouldn't be at all surprised if CPI averaged out 3.5-4% this year so you're talking a high nominal yield on treasuries. Main problem is the fund is still tiny. Only $13M in AUM so it's hard to buy anything material without moving the price. iShares also has a 0-5 year (STIP) option but real yield is a bit lower and there is some duration risk albeit limited. 

[Blake Hampton]

Many things are priced today in a fashion that is very silly as to reality. During a time of historic deficits, record low credit spreads, and booming asset values, everyone of course now believes that they're the financial genius of all geniuses simply because prices for basically everything have reached levels now that would make God blush. No more do fundamentals matter. Credit has become so ready and so cheap, money comes to almost everyone requiring little effort, our country has in-effect discovered how to break the laws of financial gravity.

 

"But growth, growth!" they say. "We will grow our way out of this hole! These companies will simply grow earnings into these mighty valuations lying before us!"

 

So much money today, yet so little in the places where it's expected.

[SharperDingaan]

You might also want to look at the current trend in who owns US treasuries, along with the current level of US reserves. It would seem that QE is involuntarily back in a big way, as foreign buyers are walking away from new issues. It's just not clear as to whether existing debt is also not being rolled in full, or if this is just brand new debt that couldn't find a buyer outside of the Fed Reserve.

 

Increasing fragility ...... looking for an opportunity. 

 

SD

Edited 43 minutes ago by SharperDingaan

[Spekulatius]

On 4/29/2026 at 2:50 PM, tede02 said:

10 year yield is back to its high for the year. Pretty remarkable with rates up and oil moving up materially, equities just keep shrugging it off. No big deal. 

Equity shrug off the higher interest rates because earnings grow for the SPY is very high. I think it’s north of 20%.

The earnings growth is quite concentrated in semis etc but is also broadening. So the fundamentals are negating the higher interest rates for now.

[Spekulatius]

On 4/1/2026 at 2:28 PM, rogermunibond said:

 

I don't think we're looking at a stagflation scenario.  The 70s scenario was GDP contraction, high unemployment AND high inflation.

 

Check the GDP growth tables you can find at FRED. There were only 2 years of negative GDP ((-0.5/0.2% in 1974 and 1975) . The other years we had GDP growth of 4-5%. The GDP growth in the 70’s was better then what we have now.

 

The 70’s were bad for equities but not so much for workers or even the general economy and that despite the number the oil

price shock did in 1974 on the economy.

 

I feel that the 70’s have an unwarranted bad reputation nowadays.