Fed’s Powell Turns Dove And Throws In The Towel As Yield/OIS Curves Remain Kinked

With a projected slowing economy and core inflation still under 2%, Fed Chair Jerome Powell officially threw in the towel on monetary normalization yesterday by announcing  no more rate increases this year and balance sheet reduction will cease in September.

coreinflationyoy

The US Treasury Actives curve remains kinked from 6 months to 10 years reflecting economic slowdown. The overnight indexed swap curve is hyper-kinked.

kink

A closer look at the US  Overnight Indexed Swap rate flattened after The Fed’s last rate hike, signaling that there be no more in the short run.

usois

One can view Powell as Mean Mr. Mustard (and Yellen as Polythene Pam), the surrender on monetary normalization is welcome by equity markets and mortgage lenders.

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