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Crescenzi: Rates have about topped out

  • "Our conviction is strengthened by an examination of what the markets are priced for ... significant rate hikes (100 basis points in 2015). This is a big shift in sentiment from only a few months ago. In fact, the increases should actually limit a further rise in market rates - because rate hikes are already priced in!"
  • Further, the rate hikes are expected to begin in Q1 2015 even as the Fed has made clear it won't commence with tightening until headline unemployment drops to 6.5%. For unemployment to drop to 6.5% by year-end 2014 would require "gigantic" monthly payroll gains (about 300K/month) over the next 15 months, says Crescenzi.
  • Even more, the Fed has said 6.5% isn't a "trigger." It's likely to be patient once unemployment hits its target, meaning rate hikes may not come for another couple of quarters after. Add it up and the first move may not come until 2016.
  • Left out of Crescenzi's analysis is the possibility of a Larry Summers-led Fed. These highly-dovish promises are ones made by the Bernanke/Yellen leadership. Summers leans more hawkish, and - if the volume of media leaks are of any value - if appears the President is leaning towards Summers as his pick for Fed chief.
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  • Shorter-duration Treasury ETFs: SHY, SHV, IEI, BIL, TUZ, FIVZ, DTUL, VGSH, DTUS, DFVS, DFVL, SST, ISTB, TBZ.
Comments (6)
  • WhispersofWisdom
    , contributor
    Comments (94) | Send Message
     
    http://bit.ly/17SPPzf

     

    Taper risk is in stocks...not bonds.
    24 Aug 2013, 09:54 AM Reply Like
  • Gigem77
    , contributor
    Comments (1169) | Send Message
     
    Time stamp the price and revisit in a couple of months. Tony is a good analyst but I think he is wrong on this call.
    24 Aug 2013, 11:21 AM Reply Like
  • tr504111
    , contributor
    Comments (2) | Send Message
     
    Don't forget the lack of GDP expansion which will also contribute to a slow or nonexistent increase in the 10-yr from here. Even if GDP rose to 4.5 then the whole cycle of lowering interest rates would begin in earnest.
    24 Aug 2013, 02:43 PM Reply Like
  • chuck lewis
    , contributor
    Comments (321) | Send Message
     
    Editor The Lewis Letter
    I have been yellin' for Yellen with a long shot predicition that Tim Giethner gets the job. Putting Wind Bag Summers head of the Fed would be like putting the wolf in the chicken coop with the doves/hawls in their bird cage. Market drops 200 points for starters with Summers. Rises with either Janet or Tim.
    24 Aug 2013, 04:29 PM Reply Like
  • The Long Tail of Finance
    , contributor
    Comments (680) | Send Message
     
    Market is having a cow, man. FED already said several times that it won't raise rates until unemployment rate falls to at least 6.5% and/or if inflation goes above 2.5% for some extended period of time. Last I checked we were miles away from those levels.
    24 Aug 2013, 05:22 PM Reply Like
  • READ THE PAPERS
    , contributor
    Comments (128) | Send Message
     
    I hope Tony is right, but the fact that he works for PIMCO taints his objectivity. Bill Gross of PIMCO said exactly the same thing 2 months ago (that rates had reached their peak) when the 10 year was at 2.5%; and now its at 2.8-2.9%.
    25 Aug 2013, 02:23 PM Reply Like
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