Powell Signals Federal Reserve Could Slow Bond Purchases This Year

[u/JustARandomPerson902]

https://www.nytimes.com/2021/08/27/business/economy/powell-taper-bond-buying.html

[u/MultiSourceNews_Bot]

More coverage at:

• Fed fund futures moves higher after Powell stresses patience (msn.com)

• Powell signals Fed will soon cut back on stimulus (thehill.com)

• Powell: Fed on track to slow aid for economy later this year (timesunion.com)

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[u/JustARandomPerson902 → u/MultiSourceNews_Bot]

Good bot

[u/GammaGargoyle]

It looks like the bond market is already calling his bluff. The Fed is trying to cool things down by talking about taper but they don't really have the credibility anymore. Their words are carrying less weight every day.

[u/Greenexernine → u/GammaGargoyle]

How do you figure that? Treasury yields just finished up for the week.

[u/hateschoolfml → u/Greenexernine]

Welcome to economic propaganda

[u/PaidByPutinBot123 → u/Greenexernine]

ust yields went up in 2018 too, then crashed down. need to look past 1 week. New is anticipated, its called "sell the news".

[u/Greenexernine → u/PaidByPutinBot123]

Okay so how do you explain the reaction in Eurodollar futures and fed funds futures too? It’s obvious Powell hasn’t lost credibility.

[u/GammaGargoyle → u/Greenexernine]

Wasnt this statement released on Friday?

[u/Greenexernine → u/GammaGargoyle]

Friday morning which is why you saw Eurodollar futures and fed funds futures react during the statements release. I’m just curious why fed funds and Eurodollar futures moved to price in a higher chance of a late 2023 rate hike if Powell has lost credibility?

[u/A_Proud_NIMBY → u/GammaGargoyle]

The bond market isn't a real market signal any longer. The FED has QE tools and Yield Curve Control (YCC) threats to keep real rates negative throughout the entire curve. Neel Kashkari even mentioned real rates and thus is a policy tool. They even nationalized corporate "fallen angel" / junk bonds at the first sign of crisis and will do it again. This is why bonds/UST yields are so low.

EDIT: Basically the stock market has taken off like a rocket because of extremely negative real rates on all bonds including UST's and the FED has verbally signaled with YCC threats combined with past QE that negative real rates are here to stay, not just for money markets but now the entire US treasury curve. If you buy a 10 or 30y US Bond and hold it until maturity you will be financially wiped out.

[u/Greenexernine → u/A_Proud_NIMBY]

There’s an extreme amount of nuance to this theory but I think Occam’s razor shows this to be the most likely.

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[u/Blackout38]

Remember when they argued for a bazooka because if you have a bazooka and people know you have a bazooka, you won’t have to shoot? Turns out when you have a bazooka, all your friends want to give it a try. Despite being great at parties that bazooka won’t be a useful tool in future crashes.