Eurodollar University We Haven’t Seen a Divergence Like This Since the Financial Crisis
5 snips
Jul 20, 2025 Two major markets are sending strikingly different signals about the economy. While the stock market flourishes, the swap market reflects deep concern. The discussion reveals how critical events from April shaped these diverging views. Insights into gold as a hedge against economic instability add another layer, emphasizing the importance of understanding swap spreads. Attention shifts to the influence of Federal Reserve policies, highlighting uncertainties around future interest rates and inflation, making for a complex financial landscape.
AI Snips
Chapters
Transcript
Episode notes
Contrasting Market Perspectives After April
- The stock market and interest rate swap market hold polar opposite views after April's events.
- Stocks see April as a minor scare while swaps confirm serious deflationary concerns.
Swap Market Bets Against Fed Inflation View
- Negative swap spreads indicate market confidence in lower interest rates for a prolonged period.
- Swaps pricing contradicts the Federal Reserve’s inflation view, betting against Jay Powell.
Swap Spreads Persist Near Record Lows
- Interest rate swap spreads plunged in April and have largely remained near record lows since.
- The 10-year swap spread almost retested its record April negative low recently, signaling persistent pessimism.