Fade the rally in yields: What is the bond market telling us?
We stand at a crossroad. First, market conditions mirror the global economy in 2018. Back then, the FED was getting to raising rates when the Eurodollar curve inverted. Flattening US bond rates too indicated that economic growth in 2019-2020 would would slow.
Now, the FED is expected to be aggressive on asset purchases taper in next week's meeting. Three rate hikes have been priced in the markets with the first rate hike in May 2022.
A ghost from the past - inverted Eurodollars & flattening US bond yields - is back to haunt the markets. This implies growth is expected to slow down at least during the next two years.
It is important to notice the bounce in US yields should be used to fade out of equity positions in the recent rally and into bond positions across the curve. Buy long-term, sell short-term durations.
Bond volatility has soared I think the past two weeks indicating that something heavy is brewing under the surface.
Now, the FED is expected to be aggressive on asset purchases taper in next week's meeting. Three rate hikes have been priced in the markets with the first rate hike in May 2022.
A ghost from the past - inverted Eurodollars & flattening US bond yields - is back to haunt the markets. This implies growth is expected to slow down at least during the next two years.
It is important to notice the bounce in US yields should be used to fade out of equity positions in the recent rally and into bond positions across the curve. Buy long-term, sell short-term durations.
Bond volatility has soared I think the past two weeks indicating that something heavy is brewing under the surface.
