Index | Recent Threads | Who's Online | Search

Posts: 22    Pages: 3    Prev 1 2 3 Next
Last Post
New Thread
This topic has been viewed 406 times and has 21 replies
wwasilev
Re: First five days of January

To me, the current inflation is mostly due to reduced supply of goods caused by Covid-19's disruption of transport and manufacturing, not by increasing demand overcoming a normal supply or unchecked growth

The attached chart of US retail sales shows that the trend-line deviation occurred around Mar'21 and it's probably due to COVID fiscal stimulus (American Rescue Plan, maybe). It's hard to say whether it's supply or demand driven. I'm betting demand since it's coincident with stimulus. The Fed will raise rates to squelch the expectation of higher inflation.

Attachment fredgraph.png (42726 bytes) (Download count: 37)


Jan 10, 2022 2:22:39 PM       
Edit 4 times, last edit by wwasilev at Jan 10, 2022 3:48:26 PM
ustonapc
Re: First five days of January

Walter,

Fed is going to raise interest rates. Four 25 bps rate hikes is better than a 50/50 chance today vs 1 in 3 chance at the end of the year.

Regards
James

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

Attachment Target Rate Probabilities for 14 Dec 2022.png (17535 bytes) (Download count: 36)


Jan 10, 2022 3:51:20 PM       
wwasilev
Re: First five days of January

James,

In addition to the Fed response, I expect the Dems will ease up on stimulus.

If inflation persists, it will become a mid-term election cycle topic that they will want to avoid.

Walter

Jan 10, 2022 4:09:06 PM       
ustonapc
Re: First five days of January

Walter,

7%. Bang on the consensus. Interesting

Fed Hike Coming.

Regards
James

Bloomberg

U.S. Inflation Hits 39-Year High of 7%, Sets Stage for Fed Hike
By Reade Pickert +Follow
January 12, 2022, 8:32 AM EST Updated on January 12, 2022, 8:47 AM EST
- CPI and core prices rise more than forecast from month earlier
- Shelter, used cars fueled gain, energy costs turned lower

U.S. consumer prices soared last year by the most in nearly four decades, illustrating red-hot inflation that sets the stage for the start of Federal Reserve interest-rate hikes as soon as March.

The consumer price index climbed 7% in 2021, the largest 12-month gain since June 1982, according to Labor Department data released Wednesday. The widely followed inflation gauge rose 0.5% from November, exceeding forecasts.

Attachment US CPI.png (24180 bytes) (Download count: 21)


Jan 12, 2022 7:52:39 AM       
Edit 1 times, last edit by ustonapc at Jan 12, 2022 7:59:11 AM
wwasilev
Re: First five days of January

Agreed. From the attached article;
"The bottomline is this: By a variety of measures, long-term inflation expectations are getting de-anchored. The Fed will not allow that to happen. It will hike much faster and much more than current pricing suggests, at least until inflation expectations are forced back down to target again."

https://policytensor.substack.com/p/the-term-...of-inflation-expectations

Jan 12, 2022 8:05:22 AM       
Jrinne
Re: First five days of January

Walter, James or anyone,

It also seems to me that the fed has an interest in bond yields as well as inflation.

I base than on thinking it would be naive to assume that the fed will let yields rise to the point that the government cannot repay its debt. Part of which involves buying new bonds to refinance the debt, as I understand it.

Any ideas welcome including the idea that even the question shows I do not have finance degree (I don't and that would be a simple statement of fact).

Anyway, if it turns out not to be a dumb question, how will this affect what the fed will (can) do? I do have some bonds in my portfolio and this is not just an academic discussion, with no practical implications, for me.

Best,

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 12, 2022 8:15:31 AM       
Edit 4 times, last edit by Jrinne at Jan 12, 2022 8:22:51 AM
ustonapc
Re: First five days of January

Jim,

The bond yields only affect bond price before maturity. All the governments bonds issued by the Federal Government are repaid at 100% of principal at maturity.

Regards
James

Jan 12, 2022 8:27:47 AM       
Jrinne
Re: First five days of January

James,

Thank you for your reply.

So if the government wants to roll-over any bond debt (because some of the bonds have reached maturity) they would like the yields to be low, right? All other things considered (including inflation considerations) they would not like the yields to get too high? And this will also affect the maturity of the bonds they buy, affecting the yields to some degree?

Again, thank you.

Best,

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 12, 2022 8:33:52 AM       
Edit 2 times, last edit by Jrinne at Jan 12, 2022 8:34:53 AM
ustonapc
Re: First five days of January

Jim,

I believe the higher bond yield/steeper yield curve will have a bigger impact to the corporate bond market (thus stock price as it increase the borrowing cost of companies especially those that borrow long term) than government and municipal bonds IMHO.

Regards
James

Jan 12, 2022 8:39:55 AM       
Edit 1 times, last edit by ustonapc at Jan 12, 2022 8:53:03 AM
Jrinne
Re: First five days of January

Jim,

I believer the higher bond yield/steeper yield curve will have a bigger impact to the corporate bond market (thus stock price as it increase the borrowing cost of companies especially those that borrow long term) than government and municipal bonds IMHO.

Regards
James

James,

Great!!! Can you expand on how we should invest based where the corporate bond market is likely to go?

Best,

Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

Jan 12, 2022 8:43:21 AM       
Posts: 22    Pages: 3    Prev 1 2 3 Next
 Last Post