I thought this was interesting in light your observations. There is just a lot of uncertainty about what is happening in the bond market. Will bond vigilantes come for America’s next president?
I agree - the assumption is that the Fed can inject whatever liquidity they feel necessary whenever they want. The overall concern is that the interest expense is too high. I think this is the real reason why the Fed went 50bps. I think we have been seeing this underlying problem of bond market resistance in the fact that Yellen has been skewing so much of recent issuance to the short end. People have accused her of being dumb for not terming out the debt at the long end - like consumers did post Covid. I thin the reality is that the liquidity was not there at the long end.
I thought this was interesting in light your observations. There is just a lot of uncertainty about what is happening in the bond market. Will bond vigilantes come for America’s next president?
https://www.economist.com/finance-and-economics/2024/10/30/will-bond-vigilantes-come-for-americas-next-president
from The Economist
I agree - the assumption is that the Fed can inject whatever liquidity they feel necessary whenever they want. The overall concern is that the interest expense is too high. I think this is the real reason why the Fed went 50bps. I think we have been seeing this underlying problem of bond market resistance in the fact that Yellen has been skewing so much of recent issuance to the short end. People have accused her of being dumb for not terming out the debt at the long end - like consumers did post Covid. I thin the reality is that the liquidity was not there at the long end.