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regime
The market spent last week watching an energy shock round-trip: Brent settled through $100 as the war escalated, then surrendered nearly all of it to a weekend pause in the strikes. What did not round-trip was policy. The probability of a July rate rise tripled on the spike and held near three …
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Gold and real yields normally move inversely: when real yields fall, gold rises. The desk explains the mechanism, why the link broke in 2024-25, and what it signals.
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Crude spiked to Brent 100 on the war and gave it back when the weekend paused the strikes. The long end moved five basis points up, four back, and held the top of its band; rate-rise bets kept most of their move. The floor absorbed the shock both ways. The Fed decides Wednesday.
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The energy shock has changed character. What began as a crude-price story has become a refining story: at least nine Gulf refineries reported damaged, eighteen Russian plants hit and Moscow suspending diesel exports, and the margin refiners earn turning crude into fuel, the crack spread, settin…
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June CPI printed soft: headline 3.5% vs 3.8%, core 2.6%, prices falling on the month, every line below consensus. The disinflation arrived and Treasuries rallied. But the rally stopped at the front: a July hike came off, the 30-year held the top of its band. A bull steepener, not a broken floor.
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The June minutes named hikes at Warsh's first meeting. Within forty-eight hours he named the builders of the new Fed: five outside task forces under King, Rajan, Andreessen and Mankiw. The 2-year already trades above the funds ceiling. The rebuild begins. The floor hardens.
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The floor under long rates has gone global. Within seventy-two hours the June FOMC minutes put rate increases back on the table at Kevin Warsh's first meeting, the ECB minutes confirmed rising inflation risks with Lagarde floating an early exit, and China's factory-gate prices printed at a near…
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The labour crack the desk named as the one risk to the floor has arrived: June payrolls rose just 57,000 versus a 110,000 consensus, while wages accelerated. A cut into four-percent inflation is stagflationary, bearish the long end, not bullish. The crack arrives. The floor holds.
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May PCE printed hot: a 4.1% headline, the highest since April 2023, and a 3.4% core, the highest since October 2023. The Fed's preferred gauge has ratified the call the desk made in May, that this pipeline would translate and pin the Fed. The cut case is gone.
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The market is pricing one hand. The June dots turned hawkish and the new chair is withdrawing forward guidance, which lifts term premium. That is the brake, mapped in the companion note, The Silence Premium. This note is the other hand: the same Fed is easing the plumbing. The enhanced suppleme…
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For fifteen years the Federal Reserve told the market what it would probably do next. The dot plot, the calibrated statement language, the carefully managed reaction function: all of it suppressed the uncertainty that long-dated bonds charge for. The new chair is moving to take that apparatus a…
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The war is over and oil has fallen, yet long-term US yields have not. The press is asking why. The desk answered first: the floor was never the war premium. It is the bid, a heavy deficit meeting a shrinking pool of foreign buyers, and this week the bid thinned while the deficit grew.
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