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Guys, you and I have seen a lot in our careers and we have seen much higher interest rates. So I'll start with what I understand: in relative terms, when things change from low levels, it's a much larger percentage movement than from higher levels. But does this really threaten to stop the AI boom at this stage due to the inability to finance at current 10- , 2-, or 30-year bond rates?
Isn't there too much concern about this right now ? I can't believe that the Ministry of Finance considered it appropriate to take this step. It's almost like, "Wow, we noticed this and we're concerned about it." I would ignore it at those levels. First of all, it's nice to see all three of you together again.
Oh, exactly. Thank you. We call it the wild trio, and I don't put anything bad into it. But I completely agree , I'm not a fan of the " twist" operation. I didn't think the markets were out of control or needed additional liquidity, and I don't think I agree with you completely, Joe. You know, we were already at four and three-quarters percent on the 10- year bond.
This is not a critical point. Of course, I'm not saying we can't go back there in the future, but there's no reason to panic about funding right now. As you said, over the years, I would say 30 or 40 years ago, we would have exclaimed, "Oh my God, these rates are so low compared to what we've seen." But I think Warsh's appearance is scheduled for Friday at 10:00.
I believe this is a very important event. I really think the market wants the Fed to not give forecasts. They are ready to accept it. What they want is to understand what criteria you are looking at? Are you looking at 5-year inflation expectations? Are you looking at the Fed rate futures market? What criteria are important to you?
And I believe that this is the proper function of the Fed—to reveal this to the market. And if he does that, I think we're in for a big boost on Friday. For example, on Wednesday we get the PCE report, and I think it will be good. In fact, I think the figures will be at or even below expectations. So, you know, I don't think there will be any significant pressure.
And let's face it : from a political perspective, I don't see him raising the stakes. Is it true, or is it just an urban legend, that the market by definition vets every new Fed chairman? And if I did, if I were the market and I was devilish, I would keep climbing to see if this was the way to go. Is this what we see?
Is the market testing Kevin Varsh now, gradually rising? No, I think if Kevin disappoints on Friday and gives some kind of bland, uninformative speech, the market might start testing him again. Then again , there's always a chance it could correct itself at the Fed meeting on September 16th, which is important because of the SEP projections and everything else.
But there could be a bit of a test if he disappoints on Friday. So yes, to some extent you could even say that there was a tiny mini- test when 30-year bonds rose above the 5% mark. So I think that again , that's it for this Friday. Speech is what we watch for. Hey Jeremy, when you say "if he disappoints the market," how exactly can he disappoint it?
I think if he doesn't give any criteria as to what he's looking at, but just says, "You know , we're having great discussions, interesting debates, and we're going to let the market..." I think the important thing is : Will he comment on Bessant and the intervention in the 30-year bond? As we all know, he was a big advocate of letting the market do its talking, and now we have a lot of questions about what his response was.
What is his real reaction to Scott Bessant? Did they communicate? Was this a surprise? Honestly, I'm not sure if he 'll mention it or not. And if I remember correctly, there is no question and answer session after the Jackson Hole talk. So that would probably be the main question he would be asked. But they must be a double-edged sword, Professor.
net bets. Well, you know, will I get net rates if the Fed changes its, you know, term structure at this particular point in time. But I think the market actually wants you to, you know, not raise rates. You voted against this. Good. Just what criteria are you considering? Ahem. So, Professor, there are many indicators that can justify this, and they will feel more confident.
These are the criteria we look at, we can also follow this as the case progresses. And it's not me? Before we begin, subscribe to receive more analytics about AI and markets. AI debate is entering a new phase. For a long time, the main question was which company had the most advanced AI models, but now the debate is broadening.
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