“Treasury Market Breakdown Is At Risk”: Fed Markets Guru Has A Scary Warning For Powell

Remember, every Fed tightening cycle ends in disaster and then, much more Fed easing pic.twitter.com/zX7Dur8nLG

— zerohedge (@zerohedge) January 5, 2022

• “Treasury Market Breakdown Is At Risk”: Fed Markets Guru Has A Scary Warning For Powell
  by Tyler Durden, https://www.zerohedge.com/
  Well, it finally happened: what we’ve been warning for the past year, namely that the Fed’s aggressive rate hikes will break something… …did in fact break something, actually quite a few somethings: first the BOJ, then the BOE (just maybe Credit Suisse), and as Bloomberg’s Garfield Reynold writes, Treasury 10-year yields are surging relentlessly higher in a way rarely seen, as they have “finally” realized the Fed’s resolve to tame inflation.
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  They just climbed for a 9th-straight week, the longest such streak since early 1994, jumping 1.18 percentage points in that time. That bond sell-off is only the most savage move since the April-May rout that sent yields up 1.4 points in a nine-week span, but its persistence is noticeable. The message is that the bond market has finally realized just how determined the Fed is about raising and raising and raising interest rates to contain and then cool inflation.
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  You see, the problem is not the tightening itself: a slow, methodical, gradual hike by the Fed would be more than welcome to offset over a decade of catastrophic monetary policy which saw QE and ZIRP (as well as NIRP) become the law of the land. The problem, as Kumal Sri Kumar noted correctly, is that what the Fed is trying to do – in response to Biden’s constant proddings, with the White House desperate to undo 14 years of excesses in a few weeks – is equivalent to a patient hoping to undo more than a decade of weight gain by stopping eating altogether in hopes of losing all the weight in a few days. The result is always one and the same and it’s always tragic. And yet, looking at Reynold’s chart, 10Y TSYs have gone on a crash diet and haven’t eaten for a near record 9 weeks, so to speak.
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  read more.

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