FICC Focus Market Outlook Post December FOMC With Ben Emons: Macro Matters
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Dec 19, 2024 Ben Emons, founder of Fed Watch Advisors and expert on central banks, joins Bloomberg Intelligence's Ira Jersey and Will Hoffman to discuss market implications following the recent FOMC meeting. They delve into how potential Trump policies may lead to heightened volatility in 2025. The conversation also covers the intricacies of interest rates and their effects on Treasuries, alongside currency hedging strategies amid liquidity concerns. Insights into the Fed's adjustments and the ripple effects on global markets offer a comprehensive financial outlook.
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Neutral Fed and Market Implications
- The Federal Reserve's signal of nearing neutral implies a potential floor on rates, around 4% for the 10-year Treasury.
- This suggests a robust equity environment, but raises questions about credit spreads, volatility, and the yield curve's steepening potential.
Increased Risk in 30-Year Bonds
- The 30-year Treasury bond has become riskier due to extended duration and economic shifts.
- Investors face asymmetric risk-reward in fixed income, with insufficient yield for the duration risk.
Fed Actions and Asset Valuations
- The Federal Reserve's actions have significant knock-on effects on other asset classes like equities and currencies.
- Emerging market currencies are quickly pricing in the new tariff regime, leading to divergence in markets.