RE:Interest rates and central banks Food for thought.......you 20% ers lololol........
Many people are assuming that this is the high in interest rates for this cycle. There is no question that the consensus has reached extreme levels. Nevertheless, we are in new territory since normally the rates start to decline because there has been a sharp downturn in the economy and the view that a recession is unfolding or the banks have managed to blow themselves up again. There has been a shift based on this consensus among unsophisticated institutional clients who have been buying the long bonds assuming a rate decline is around the corner. The general consensus has reached 70% expect rates to fall in 2024.
Unbeknown to the vast majority, we are looking at a whole new crisis. With so many institutional investors buying long-term bonds assuming rates must decline in 2024, they are counting their profits before they are made. There is a HUGE divergence unfolding between the short-term rates and long-term. These institutions are oblivious to the impact of war, and they are not paying attention to China - AT ALL!!!!!!!!!!!!!!!!!!!!!
December is a key target for the Fed's meetings. Even a rate cut now appears to be a singleton rather than a long-term reduction in rates despite the fact that the Fed now sees that government spending will soar with higher rates. China warns that long-term rates can still rise even counter-trend to short-term. Hence, the long-term rates still appear to rise and there will have to be a major shift in buyers come the beginning of Civil Unrest post 2024 and the likelihood of war on several fronts.