Federal Reserve

The way to think of a flattening yield curve is as a signal that the market expects Fed tightening to precipitate a slowdown that halts or even reverses future hikes. It's the market's way of saying they expect the Fed to tighten and then…

This report was the first under a major revision to reporting of US economic data. The personal savings rate stood out.

My first weekly post at Creit Writedowns Pro includes some thoughts on Tesla, Trump's Fed choices, the US trade war with China, M&A and corporate earnings.

The sense I get is that Powell is a closet Taylor Rule devotee. If I'm right, then the neutral rate is quite a bit higher than where we are now.

This is Credit Writedowns daily newsletter for 19 Jul 2018. The big issues: the US economy, Fed policy, currencies, trade and government deficits.

These are conflicting narratives, yes. But they don't have to be because, as Minsky quipped, stability breeds instability.

The yield curve has flattened to the point where two-year yields are only 25 basis points lower than 10-year yields. I have been predicting this outcome for several months and see this as a level to worry about the Fed's ability to engineer…

Right now, we are still very much in the bull market phase. So the number of macro theses which make money are limited. US curve flattening and the prospect of Fed overtightening presents the best risk/reward.

The Fed is likely to continue to talk up the US economy. And I believe markets will react. With the yield curve at 32 basis points spread between 2- and 1-year Treasuries, we still have scope for further curve flattening.

Note: This post first appeared on Patreon on 2 Jul 2018 I saw a Twitter exchange this morning that reminded me that the Fed is facing a political crisis due to its quantitative easing program. And I think this will limit the Fed's…