Not so fast is a popular saying these days and when it comes to inflation rolling over and playing deceased is a Federal Reserve Bank pipedream, a scenario, we would say devoutly but these are hardly devout people, to be whished.
We will say it again, the Fed is bankrupt as is the country. That, however, doesn’t mean they won’t try to protect the Biden gang in the upcoming election.
It’s their mandate. When you’re owned, you’re owned.
These sneaky bastards now devoid of any immediate rates cuts owing to fears about sticky inflation they created have another plan and here it is, turning loose a feel-good market melt up rally.
By the way, when you fly illegals into the country in the stealth of the night and dump them in states you hate and then secretly supply long range missiles to the Ukraine, sneaky bastards is hardly an exaggeration.
“That's precisely what we meant in our tweet from April 16 above when we said that the Treasury now has "$150BN in stimmy dry powder" in the form of less Bill issuance, less RRP drain; yes: it won't be as powerful as the full TGA drain in 2021 which sent stocks soaring to a record high, but it will still be very powerful.
“It's also what Charlie McElligott said in his latest note two days ago, "looms as a potential “risk-on” catalyst for Equities and broad Assets"
“According to the Nomura strategist, in theory, the realization - as soon as next week's Quarterly Refunding - that the Treasury would need far less debt issuance and could in fact provide substantial liquidity to offset any near-term QT, would be a “surprise,” but he has "high conviction" it will happen, and is therefore "of the view that it’s again being grossly underpriced."
“In other words, (or perhaps, in describing what we said above in a more fluid fashion), McElligott warns to "get ready for the potential that Janet Yellen’s Treasury could see them again attempting to pump the breaks on the Rates move, similar to last Fall, through another QRA refunding surprise (and White House fiscal spending spree via the rebuilt TGA in the months ahead)....intervening in order to facilitate actions which will help to offset the Fed having to delay / postpone rate cuts."
“That's right: while it is now conventional wisdom to most that the Fed's rate cut delay is unquestionably bearish for risk assets, all the Fed (and President) cares about is to avoid a crash until November 5... and a drain from the Treasury General Account may be just what gets us there and sends stocks to record highs in the process.” Source
“Short-term inflation expectations rose... again... according to the latest UMich sentiment survey with 1-year expectations at 3.2% final, up from preliminary 3.1% for April, and 2.9% for March. This is the highest level since Nov 2023...
Source: Bloomberg
The headline sentiment also declined in April from three-year-highs. Consumers’ perceptions of their current financial situation and the economic outlook over the next year both slid to four-month lows. The current conditions gauge dropped to 79 from 82.5. A measure of expectations fell to 76 from 77.4.
Source: Bloomberg
While “consumers’ frustration over high prices in their day-to-day spending decisions grew this month, price concerns for large purchases - durable goods, vehicles, and homes - were all little changed from last month,’’ Joanne Hsu, director of the survey, said in a statement.
About 38% of consumers reported that high prices were weighing down their living standards, up from 33% who said so last month.
“Sentiment gauges also provide insight into voters’ feelings about the economy and their finances leading up to the presidential election in November. President Joe Biden’s recent polling bump in key battleground states has mostly evaporated amid economic pessimism, the latest Bloomberg News/Morning Consult poll found.
“Consumers continue to express uncertainty about the future trajectory of the economy pending the outcomes of the upcoming election,” Hsu said.
“Partisan differences in views of the economy remain pronounced. While Democrats and Independents saw little change in sentiment this month, sentiment for Republicans fell about 6 index points.
“Republicans reported declines for four of the five components of the sentiment index, reflecting their deteriorating views across multiple facets of the economy. Despite these declines, sentiment for Republicans remains well above 2022 and 2023 levels. Source
“In fact, the current reading for Republicans’ Expectations Index is the second highest (after last month) since the end of 2020, as the Trump presidency came to a close.”