What The Heck Is Going On? Jaw, Meet Bone

Rate hikes are back on the table!!!!  Some would say this is the case.  What the heck is really going on here?

We'll take a stab.  Let's do so by going back to the late summer and fall of 2023.

First, a couple of recent posts here:

StartEngine March 2024 Offerings

Bitcoin Mega Bull Update

Bond yields were moving higher and gaining speed in doing so.  US 5yr CDS were rising.  The markets had a sense of "oh no, here we go it's happening" regarding crash like scenarios. 

Did the Fed CHANGE any policies at this time?  NO.

Jaw, meet bone.  The Fed began to jawbone in a dovish manner bringing the possibility of lowering rates and shifting to an easing stance on the table.  The markets of course gorged on this and the ten year note came way off its high yields.  The Fed was able to accomplish easing and rate relief just by talking about it

The Fed thus guided the futures markets towards pricing in certain cuts and inciting more animal spirits.  Then, JPow tried to walk it back.  The market wasn't listening at first.  Then the jawboning about easing prematurely picked up and got more hawkish.  The markets started taking some cuts off the table.

At this point something else big shiftedInflation looked like it possibly stopped declining and was potentially even picking up again.  TIPS were reflecting this and other metrics.  Bitcoin kept up some momentum.  Now the Fed had an issue.  There might be an academic and/or traditional call for more hawkishness and even hikes.  

And here we are today.  The markets have raised the possibility of rate hikes to occur, but the odds are not strongly suggestive of that currently.  Nonetheless - the market thinks hikes are possible.

Now - the Fed has adjusted that premature exuberance just by jawboning

So, what to make of the below?

fed jawboning qe



The Fed is jawboning buying bonds.  It says it right there in the speech: "asset purchase program".  Waller also made a point to say they wanted to get rid of the MBS and start buying up the short end.  Translation: the Fed needs to launch QE to provide a bid under the short end which Treasury plans to use as much as possible.  

What was also very telling is no jawboning in either direction or effort to emphasize rates.  Nothing says the Fed can't leave rates unchanged AND initiate QE with emphasis on buying 5yr and shorter.  It's awkward but plausible. 

Maybe the real point is that the Fed does see BOTH inflation picking up AND a need to place a priority on buying what Yellen needs to sell over the need to ease on rates just yet - even in an economy not growing outside of government spending.  Interesting. 

Corporate Fitness and Employee Wellness

Bitcoin Loyalty Rewards


How do you rate this article?


davidgyoung Verified Member

BTC since 2013. Investor. Entrepreneur. Always looking to learn and develop.

Alternative Investing
Alternative Investing

This blog will explore ideas, news, and other interesting information related to alternative investing. Though we may discuss general macro finance, investing, economic issues and even more traditional investments like equities, bonds, and RE - the main focus will be on other options such as crowdfunding, crypto, collectibles, and more.

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.