|
Feb 10
|
|
—
|
LONG
|
Geo Chen
Substack author, Fidenza Macro
|
The market is currently pricing in a terminal Fed Funds rate of 3.10%, but the author believes incoming Fed Chair Warsh will cut rates more aggressively, potentially to 2.50% (25bp every quarter). This significant divergence between market pricing and the author's expectation for Warsh's policy implies that the front end of the yield curve is due for a repricing, leading to lower short-term yields and higher bond prices. Position for lower short-term interest rates by going long short-term US Treasuries or related interest rate futures, anticipating more aggressive Fed rate cuts than currently priced. Warsh's actual policy stance differs from expectations; inflation proves more persistent, limiting the Fed's ability to cut rates; unforeseen financial system stress could alter the Fed's path. |
Fidenza Macro
The end of the bull market or just a pause fo...
|