저자: Kevin · 외국인
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연준 금리 전망과 채권시장 신호를 분석. 시장은 2월 금리 동결 38.6%, 인상 61.4%를 반영하며 연내 인하를 가격에 넣고 있음. 2년물 금리가 연준 기준금리를 하회하는 과거 패턴을 근거로 인하 가능성 제기. 다만 연준은 연내 인하에 부정적이며 금융여건 완화 시 인플레 재점화 위험 경고. 역레포 잔고 2.2조달러, 유럽 채권 유동성 문제, 중국 재개방 인플레 위험(약 7200억달러 저축)도 언급. 불황 대비 근검·부채 축소를 권고.
다듬은 글
the bond market is pricing in a federal reserve a U-turn and some massive new catalysts have just occurred including what just happened to the two-year treasury yield what is China's inflation going to look like how large is China's inflation going to be relative to what we saw in the United States we have answers to exactly that in this video we'll also talk about China's population problems and we'll talk about the issue the Federal Reserve faces but the potential good news we have about Supply chains combined with some bad news on CPI a lot to cover in this video let's get started right after reminding you January 30th is around the corner make sure to use that last coupon code ever where you're moving away from the couponing strategy check that out you'll get the best price guaranteed for sure for at least the next three months if not even longer so conside lowest entry place is close to 300 bucks so it's not actually that much check it out we'll see you soon right now markets are pricing in a 38.6 chance of a pause yeah a 38.6 chance that on February 1st the Federal Reserve ends up pausing that is in contrast to a 61.4 percent chance that the Federal Reserve hikes rates 0.25 with no probabilities assigned to a 50 basis point hike none at all and this is really the bond market once again telling us the FED is being too aggressive it's time to dial back expectations on the FED there was actually uh well we can actually look at uh what what Futures are indicating the Wall Street or the financial times rather did a great piece on this uh Financial Times here just reported that the Futures Market indicates that the FED won't even make it to five percent instead not only won't they make it to five percent they'll probably cap out at about 4.75 percent but by the end of the year according to the financial times the Futures Market is pricing in at least a half percent of cuts and by the end of 2024 the FED funds rate will fall down to 2.8 and when you look at the depth of the inversion of the yield curve historically we are pricing in that by the time the FED is done cutting rates we will be right back at zero now the FED might not be done cutting rates unless something massively breaks until potentially 2026 which means we could really be going through 24 25 26 we could be going through three years of rate Cuts unless they break something and are forced to drive down uh rates lower but I expect that they'll slowly trickle down rates and that's exactly what the bond market is expecting as well of course you do have individuals like Michael burry who say that well yes we might see even a half a negative half percent of deflationary figures in CPI this year which could actually end up leading the Federal Reserve to cut rates this year as the bond market is pricing in but don't get too excited we'll end up with a second wave of inflation says Michael burry and that'll end up leading the FED to have to raise rates again just like they did after the 70s level of inflation were they lowered rates and then ended up popping back up to uh to have to raise rates again in the early 80s but this time because they had broken inflation expectations they had to raise rates more aggressively now I somewhat dispute this mostly well partially because of Hope but also because uh the quote this time is different oh gosh neither of those actually sound like good reasons no 70s inflation was substantially different from the inflation that we face today no matter how you slice them we had just left the gold standard uh in the early 70s and we just ended up removing price caps from the administrations of the late 60s and early 70s that led prices to initially soar around conveniently the same time as we had left the gold standard which led to this belief that oh we're about to turn into the Weimar Republic and there was no precedent for the FED actually ever being able to control inflation on a Fiat currency because it had never been done before in America in fact the only history we had to look at in the 70s was that every single currency that has ever existed has failed so of course inflation expectations uh were at least somewhat unanchored in the 70s we don't have that problem today now it's possible that problem could come back but it appears that whether you look at consumers or you look at the bond market the belief is that inflation should continue to Trend down now we do have five-year break-even inflation rates which are somewhat volatile they're sitting at about 2.29 right now they were as low as 2.19 a week ago I was hoping that downtrend would continue because I personally think inflation Break Even expectations on the five-year need to go down to something like 1.5 1.6 before the FED actually Cuts however we're well off the 3.6 where we have been previously and we're on a straight downtrend despite the sort of daily volatility that we get on the five-year break even going back though to the financial times we can see that the financial times argues that one year U.S inflation swaps are only pricing at 1.7 seven percent that's the lowest level in more than two years and the one year Break Even inflation rate stands at two percent potentially indicating that inflation might be down as low as two percent by the end of next or at the end of this year and so the market as they say genuinely believes that inflation will come down more quickly than the Federal Reserve actually expects it to now uh of course the Federal Reserve says hey we don't want to repeat the mistakes of the 70s or the 80s so as Christopher Waller says quote we do not want to be head faked inflation is not just going to miraculously melt away it's going to be a slower harder slog to get inflation down and therefore we have to keep rates higher for longer and not start cutting rates by the end of the year this stands in large contrast to the market so now how is it possible that the market could be pricing in Ray cuts when you have individuals at the Federal Reserve saying we're not going to cut by the end of the year well this is possible because the Federal Reserve is between a rock and a hard place as soon as they say or in any way indicate or suggest that they are actually agreeing with the market that they might cut rates by the end of the year which even if they say they won't right now they still can right they have the right to change their mind just like you and I have the opportunity to flip-flop so as soon as the fed and this is The Rock and Hard Play situation the FED obviously now in control of driving the ship towards inflation plummeting but as soon as the Federal Reserve suggests sure yeah you know maybe maybe we'll cut rates by the end of the year I expect that they would set off one of the largest not only stock market rallies but they would actually end up setting off a rally in the bond market now this is important if bond prices rally up because all of a sudden people say that's it inflation's done let's take our cash throw it into bonds what happens is bond yields go down and when bond yields go down because prices of bonds are going up what ends up happening well you end up doing what's known as loosening Financial conditions a lot of interest rates are tied to interest rates in the bond market so that could be credit card rates mortgage rates uh it could be rates on a car a boat a plane it could be a margin line of credit for a company or a wholesale line of credit all of these rates coming down would loosen the stress on businesses and people which is great for us but actually runs counter to the federal reserve's goals and all of that could be set off in motion simply by the FED yapping and this is why markets have kind of started to look at the fed and say uh whatever you say fed we get it we see you we hear you we see you but we're over it now of course there are absolutely still real risks what are those real risks are the fact that jobs and wage data have to convincingly come in low essentially uh no this isn't to say we don't want individuals to start making more money but it is to say that when that employment cost index comes out for Q4 on January 31st we need to see that we're not introducing any kind of wage price spiral because that is not only likely to lead to entrenched inflation but it is likely to break inflation expectations now one of the most reliable indicators for the Federal Reserve cutting rates is actually fascinating and it has to do with this thing called the two-year treasury bond in relation to the fomc rate now watch this this is crazy so what you want to see here is that in 2004 the two-year treasury fell below uh this is probably closer to 2005 actually 2005 the two-year treasury fell below the federal reserve's fomc rate you could see the two-year treasury actually led the federal reserve's rates up see that here how this blue line that's the two-year treasury see how it's more lumpy because it moves with the stock market that two-year rate actually led the federal reserve's rates up and frequently follows what the bond market tells it to do so even though there's fluctuation once it became clear that we potentially had hit AP care the Federal Reserve happened to hold on rates and they held without the two-year ever breaking the fomc line again and as the two-year treasury fell so did all of a sudden rate Cuts start coming now of course we fell into a recession in 2007 8 and 9.
but there was another instance as well where if we look at over here 2018 we could actually see again the two-year lifting off over here before the federal reserve's liftoff two-year Peaks out above the Fed fomc rate breaks on the hold and then what the two years starts falling and sure enough the FED starts cutting now what's remarkable about this is if we pop up over here look at what just happened we we have literally had the two-year lead the Fed Up and Away Up and Away there has not been a crossover of the two-year and the Fed fomc rate what just happened the bond market did it again it said rates are coming or rate cuts are coming now it's not to say we're not doing this right before recession in fact honestly we're probably already in the recession uh in fact if we look at last year we already had a quote-unquote technical recession two quarters in a row of negative GDP unless of course somehow that magically gets revised away or we just had a really long and shallow recession honestly I I don't really care I am treating this situation as if we are in a recession and in my opinion that means increasing frugality decreasing debt and working harder to ensure that you could maximize your income that is important in these sorts of times but these Cuts or or I should say this sort of dropping in the two-year treasury it in my opinion is one of the most reliable indicators that we have suggesting that the FED is trending towards this idea of flipping and having to cut now another thing that's pretty weird and and this is another thing that sort of suggests If the Fed keeps going here they might end up breaking something you have this Federal Reserve facility called the federal repo facility and the repo facility is supposed to be a temporary place where people well I should say money markets not people but money markets Banks institutions can park money overnight and they can receive a yield on this roughly equal to what the federal the the fed's real uh uh federal funds rate is now that Federal Reserve repo facility has exploded in use since about March of 2021 and there were some changes here in liquidity and reserve requirements at banks that actually occurred on March 31st which perfectly coincides with all of a sudden when Banks started using the reverse repo facility Well now we're sitting somewhere at about two trillion dollars of money sitting over here now there are some problems with this uh and we're gonna hop on over here to a financial times piece where uh they make this observation they make the observation that investors are stashing an average of 2.2 trillion dollars away at the reverse repo facility and you might ask yourself okay well you know why does that matter well the reason it matters is simple instead of Institutions buying treasury Bonds in a time of quantitative tightening which remember if they buy bonds that would increase prices in somewhat lower yields but then it would let the FED kind of dump more bonds right so it lets them roll off bonds that lets markets absorb those bonds rather than that happening what's actually happening is the Fed is quantitatively tightening but people aren't buying treasuries to offset that when I say people I mean institutions instead they're parking their money into the overnight repo facility because think about it if you could earn 3.75 basis points in the repo facility and you have zero risk it's literally deemed risk free and not only is it a risk-free investment but there is no Market volatility right even treasury bonds are considered risk risk-free but you have Market volatility not only do you have uh no Market volatility in the repo facility but you are risk-free so you have the benefits that treasury bonds don't have which have Market risk the FED repo facility doesn't so institutions are like well gosh okay we'll just park our money over in the repo facility to some degree this leads to a massive liquidity crunch in the bond market and this is the one place where investors suggest if this continues we could end up seeing something break in markets which ends up leading to some kind of Black Swan Catalyst where the FED has to swoop in and bail out markets basically support the the uh fiscal Plumbing uh or the the uh the financial system so to speak much like the bank of England did and then that then either ushers in back the normal era of quantitative easing or or we potentially reignite inflation by doing so and then we end up proving Michael burry right so there's some risks to that especially since there are still other risks to inflation that we need to consider uh consider that um when we had uh the earnings call for Procter Gamble which I covered last week one of the things that made me nervous about it was oopsies we actually started seeing signs of inflation still running hot for Procter and Gamble now personally I think there's a little bit of a risk that Procter Gamble just didn't hedge appropriately because they they said they didn't or they had contracts roll over from 2021 into 2022 so I'm treating them right now as a little bit of an outlier but they are an outlier that says hey we're still dealing with inflationary pressures I'm hoping that's just their excuse for well basically having bad earnings now Barclays had a great piece on the market in the economy and the fed and out of the piece one of the most important parts for me was the risk that CPI actually doesn't come down now that's probably the biggest thing we're not pricing in see we are pricing in already that the housing sector is going to roll over that's already priced in to some extent into why we're seeing the stock market go green right we believe that inflation is going to plummet and there are a lot of spammers in the Facebook comments on my live stream here okay Can't Ban uh interesting for some reason I can't ban them either well ignore the losers who are chatting in the chat there's no way I can chat while doing this uh that is impersonating me everybody else chatting I respect but anyway continuing on the big risk is that we end up seeing uh in inflation from from CPI shelter not end up showing up or we end up seeing finance and this is why the FED has to be tough right imagine the FED loosens Financial conditions much like I talked about and then all of a sudden real estate starts going up again and rents start going up again well what do you have in a situation like that a crisis you have a really bad situation because the hope that we have that inflation is going to plummet is that and CPI is going to fall due to housing and new and used vehicles which I think it's I think we can all agree that new and used vehicles are probably going to continue their plummet but if Financial conditions shift and we start supporting shelter inflation going up again that would be bad and I almost guarantee you I would put money on it I should say that one of the discussions uh that uh that Jerome Powell is having with his uh board essentially is the idea that hey look if we end up talking this market up and we end up saying that all is good inflation is coming down then you are going to break any hope that inflation will come down via uh shelter the anchor of inflation uh through shelter that's a big deal so uh these are critical things that we want to pay attention to now on top of this what I think is also really interesting is uh the what the Eurozone is doing but also what we've got going on with China so we've got to talk about these things too so let's take a brief moment and uh look at the Eurozone so uh in the Eurozone we uh we just had this uh piece that was put out by zabin zabina uh she is actually a board member uh of the ECB the European Central Bank this is a piece that she wrote in the uh oh no I'm sorry she's an executive board member of Deutsche uh the Deutsche bundespunk okay not the ECB uh either way she wrote a piece of in the financial times basically talking about how in the past they had to cut or they had to have low rates uh to essentially support what was too low inflation and today they have to do the opposite right that's that's where she starts fine not a big deal but what we want to look at is she says over here this is very much what I've been talking about as potentially that risk for the United States look at that just listen to this piece right here the consequences of the significant Market footprint resulting from our purchase programs roughly 40 percent of public debt is in the hands of the Eurozone system and those issues are increasingly visible collateral scarcity and markets for German bonds is a significant Distortion okay let me now try to say this in English uh because uh you know I'm not uh that would that is a mouthful so in English as we have less volatility or as we have less liquidity in the bond market we increase the odds of breaking something both in Europe and the United States much like what we saw in England and this is a member of the Deutsche bundespan telling you that we are seeing the same problems that England saw to some degree to a lesser extent obviously and as the U.S faces in our bond market and this is a problem because at some point in the future we might have to step in and start buying bonds again right now the European Banks RS or the European Central Bank is expected to start quantitative tightening by essentially rolling off bonds much like the United States is doing but that is going to again reduce liquidity so hopefully hopefully investors like you and me by bonds is what they're saying so they don't end up breaking something but that breaking something is probably the one swan uh or should I say Black Swan that that everyone is concerned about uh so we'll have to pay attention to this dearly so all right let's continue on so that's the uh that's the European situation reiterating what we have here the other issue is China and this is this is another big one uh that we have to pay attention to and this is the reopening inflation concern remember we basically went from zero covid to full covid China's economy as a result grew at its second slowest Pace since 19 and since the 1970s though GDP didn't come in as badly as expected it came in at three percent for 2022 instead of the 2.7 expected uh joblessness down to 5.5 percent retail sales actually beat beating three months of disappointments but China's population is starting to shrink leading to longer term concerns that China is going to slow down it's the first time in 60 years that we've seen China's population shrink and we actually had 850 000 fewer people alive in China than we did at the end of 2021.
we also only had 9.56 million babies born in 2022. that's the lowest level of babies born since 1950 and this is in part uh well uh the population decline is in part because of low numbers of babies born but also people leaving China 10.4 million individuals died but remember we had a population decline of uh of of one point uh we had a population decline of 850 000 the uh difference between deaths and babies born oh that actually is somewhere close to that uh let's see here let's do that number really quick that's 10 point 10.41 minus 9.56 oh that's about yeah okay that that actually aligns with the 850 000.
okay in my opinion people people dying doesn't fully account for the difference in the population in China I think there's a higher likelihood there's also some amount of individuals who are leaving China and moving to different areas I don't think China wants to send that signal so it's unlikely that we're going to see that sort of data come out of China it's actually surprising that they even give us negative data sometimes but uh I wouldn't be surprised if there is a larger decline actually happening than we expect but anyway they are suggesting it solely because less babies were born compared to uh how many individuals died uh now that gives you a little bit of background on sort of the longer term potential lid on China's growth uh although China is doing better than expected now and Bloomberg actually had a great piece analyzing the potential impact of China's reopening and this pieces and the estimate is that China's reopening could essentially come with a 750 or 720 yeah 720 billion dollar inflation bomb now I think this is interesting because nimura Holdings indicated that the Chinese households have built up about 720 billion dollars now 720 billion dollars in savings is about one-third of what the United States built up of about 2 trillion in excess savings and part of that is because China didn't offer stimulus payments to people instead they offered money to corporations to keep people employed so they actually which is real really wild I mean think about that for a moment just take like a brief pause and think about that for a moment China a socialist company or socialist country provided money to businesses to keep people employed whereas the United States under a capitalist structure gave money to everyone it's just interesting uh which seems more socialistic right anyway so the the numbers are fascinating though the potential that the Chinese individuals have themselves saved up 720 billion dollars does potentially send the signal that yes maybe we could see an inflationary surge or at least some kind of pressure from China now personally and this is my opinion I actually believe that most Supply chains today have built themselves up to make sure a 2021 shortage never happens again people and businesses are frustrated that they did not have the supply to fulfill demand the worst feeling is when you're in business but you can't fulfill all the orders you're getting it's the worst feeling ever it makes CEOs look like clowns and it pisses people off especially investors and so I think that a lot of companies and this is what we're seeing with companies like Taiwan semiconductors I think these companies are setting up massive spare capacity to where right now we're kind of like like if this is a normal rubber band we're kind of like a crumpled up rubber band right now we're just waiting for some more demand to start coming because we're in a recessionary environment whereas in 2021 the rubber band looked like this it was almost stretched to the extreme and and some would argue it snapped right so if the rubber band represents capacity I think we're scrunchy right now which is good because that means if we reopen you could kind of scrunchie to normal and I hope that the Chinese uh you know reopening doesn't create the sort of inflationary uh disaster that we've uh that would that we saw in 2021 now uh I made a little note here that I think the Omega surge of Chinese pent-up demand will actually end up being very good for byd and Tesla I I believe this because I think after three years of lockdowns people are going to want a car uh now the byd uh there are some really great videos on the auto three uh in the United Kingdom that was just released from byd their full self-driving is actually non-existent now to the extent that you think that matters for vehicle developers I think it's quite fascinating but they essentially have adaptive cruise control and Lane centering but I think Honda's had that for like three years now so I personally don't find that very impressive however they are less expensive Vehicles than Teslas so while Tesla does have that technology Edge I'm not sure yet that people might want to pay that sort of money uh for a Tesla versus a byd and so you're probably still competing in two different markets I do think it's very interesting though and I've been saying this for over a year uh that I think the Chinese are very very Smart in that they ramped up their precautionary savings because the government wasn't going to come do that for them and this here shows you the potential net increase in China's household savings deposits I here wrote a wow on that because I think it's actually very impressive that they pulled this off without the help of the government I don't think we would have seen that happen here we would have seen a lot more defaults and foreclosures but then again you know we don't have the kind of punishments for for not paying back your debts as China does uh and so we'll see if commodity prices and oil and uh Supply chains end up inflating like they did here in 2021 again I don't think so so I think the rise in oil uh prices right now is a little bit more of a trading move do keep in mind that the substantial movements that we've seen away from for example growth Innovation and Technology uh certainly profitless attack but getting away from profitless Attack makes sense in a recession I think a substantial portion of this uh a rise in oil that we've seen recently which is still nominal it's just a tactical trade it's hey it's logical to sell the idea that China is going to cause a re-inflationary boom let's go long oil and then talk up how much of an inflationary boom there's going to be in China personally not the biggest believer of that so this gives us a little bit of insight into The Fad where rates are going uh Commodities risks but also other risks that we Face to inflation
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