Rebel Capitalist News
This Is How Interest Rates Could Explode Higher (Or Go Lower)
Oct 3, 2024
Chris MacIntosh and Lyn Alden dive deep into the world of interest rates and treasury yields. MacIntosh provides insights on how historical trends reveal the complexities behind supply and demand in determining rates. Alden elaborates on the Federal Reserve's role, emphasizing that growth and inflation expectations are critical beyond just policy actions. They challenge conventional wisdom and explore potential explosive shifts in interest rates, shedding light on how these factors could reshape investment strategies.
17:51
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Quick takeaways
- The podcast emphasizes that future economic growth and inflation expectations significantly influence interest rates more than the supply of treasury securities.
- A thought experiment demonstrates that investors prioritize favorable yield spreads over the current supply of treasuries when making investment decisions.
Deep dives
Debating the Impact of Treasury Supply
The podcast discusses the debate surrounding whether the supply of treasury securities significantly affects their prices and yields. Proponents of the idea argue that if the Federal Reserve buys a substantial amount of treasuries, it distorts market signals and renders the yield curve meaningless. This perspective suggests that an inverted yield curve, which typically signals an impending recession, is primarily a result of the Fed's actions rather than genuine market conditions. However, the argument raises questions about the impact of oversupply on interest rates and whether supply alone can explain the current state of the treasury market.
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