Loading ...“In short, the only thing that experts agree will avoid another crisis in the bond – and funding – markets is if the Fed effectively takes over the entire yield curve, ending capital markets as we know them,”
GOT GOLD?-WTI crude crashing-May crude is $14.50—down 3.60we foresee the Fed adopting front-end yield curve control (YCC) in late Q2 or Q3 that sets caps on Treasury yields out to about three years.
But…
While YCC may be a necessary policy response, it is not sufficient since it focuses on the front-end. In the US, medium- and long-term rates are more relevant for impacting financial conditions important to business and consumer economic decisions. If implemented, front-end YCC should be paired with more traditional QE that purchases securities across the curve and keeps long-end rates contained as well.
In short, the only thing that experts agree will avoid another crisis in the bond – and funding – markets is if the Fed effectively takes over the entire yield curve, ending capital markets as we know them, and launching “price discovery” by decree. While we have no doubt that the Fed will go the length, we can’t help but remember that such terminal central planning did not have a happy ending for the USSR.
https://www.zerohedge.com/markets/repo-guru-zoltan-pozsar-spots-next-market-land-mine