On Monday at 11:30 EST, The Federal Reserve Board of Governors will have a closed door session to determine if they should raise rates and/or change the speed of Fed asset purchases.
Between raging inflation and the potential wag-the-dog Russian/Ukraine tensions, The Fed has a lot to consider. Particularly if they are watching the 10Y-2Y Treasury yield curve plunging.
And we have the USD Inflation Swap Zero Coupon rate rising again.
While the Treasury and US Dollar Swaps curve are upward-sloping (not surprising since The Fed has aggressively pushed short-term rates to near zero), we are seeing Treasury Inflation Protected (TIPS) in negative territory until we get to 30 years.
The ICE BofA MOVE volatility index, a yield curve weighted index of the normalized implied volatility on 1-month Treasury options, has more than doubled under Biden.
And with Russian-Ukraine tensions growing, we see WTI crude oil up 96% since Biden took office.
Monday should be an interesting day. The market is now pricing in 6 rate hikes for 2022.
To paraphrase late, great Otis Redding, we can’t turn The Fed loose.
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