DXY, Yields, Interest Rates, GDP

1 Year Yield as % =1.7170  Interest Rate =2.7170

2 Year Yield as % =1.4860 Interest Rate 2.4860

3 Year Yield as % =1.4380 Interest Rate 2.4380

5 Year Yield as % =1.4230 Interest Rate 2.4230

7 Year Yield as % =1.4970 Interest Rate 2.4970

10 Year Yield as % = 1.5620 Interest Rate 2.5620

20 Year Yield as % 1.82 Interest Rate 2.82

 

Commercial Paper as % = 2.03 Interest Rate 3.03

GDP as % = 2.1 Interest Rate 3.1

CPI Annual as % =1.81 Interest Rate 2.81

CPI Quarter as % =0.3 Interest Rate 1.3

 

30 Year Yield as % =2.044 Interest Rate 3.044

DXY 98.20

Fed Funds Effective as % = 2.13 Interest Rate 3.13

Headline as % =2.25 Interest Rate 3.25.

Commercial Paper as % = 2.05 Interest Rate 3.05

Commercial Paper as % = 2.08 Interest Rate 3.08

GDP as % = 2.1 Interest Rate 3.1

Absolutely Powell Raised  rates to high and to quickly and as the end result was a severely misaligned yield curve. All Fed interest rates and GDP trade above the 30 year yield while Europe and the EUR trade between the 20 and 30 year yield.

Both Europe and USD suffer from severe mis alignments. Proper for USD is Fed interest rates below yields and for Europe, ECB interest rates above yields. Between FED and ECB interest rates and yields, convergence trades. Not sure ECB easing makes any sense due to yield and interest rate positions. Easing drops interest rates further yet ECB money supplies were always on the rise since 2008 in the current 12 billion vicinity and I always assumed the ECB goal was to not allow money supplies to deviate far from USD in order to hold the EUR at an acceptable exchange rate Vs USD.

Yet Eonia 0.636 V 2.13 Fed funds allows for a 1.49 spread. This spread must break wider.

For Fed Cuts, Trump is right, Powell must ease while the ECB must tighten, not ease to rightsize both systems. And especially now as GDP is in good shape as mentioned months ago from GDP long term averages. CPI below GDP as well is correctly aligned.

 

Brian Twomey

 

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