Bloomberg Surveillance
Bloomberg Surveillance: Lara Rhame on 2024 Rate Cuts
Feb 6, 2024
Lara Rhame discusses trading platforms, higher yields, and bond market signals. She explores the potential future rate cuts, higher yields, and inflation pressures. The importance of monitoring economic data and preparing for yield volatility is stressed.
06:37
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Quick takeaways
- The bond market's inversion suggests nervousness about an economic slowdown and the possibility of rate cuts in response.
- Factors such as rising shipping costs, service wages, and food prices contribute to the potential for higher inflation.
Deep dives
Bond Market Signals Nervousness and Potential Economic Slowdown
The bond market's inversion, where short-term yields are higher than long-term yields, indicates nervousness about an impending economic slowdown. This could be due to muscle memory from past economic problems when the Fed lowered rates to zero. However, there is room for the Fed to cut rates further if the economy slows significantly. Higher yields are predicted, especially in the long end, as the bond market settles around 5% nominal GDP growth. Market complacency about low long-term yields needs to be challenged, as yield volatility is expected.
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