Monday, November 29, 2021

Taper tantrum of sorts

A mass exodus from bets on higher rates appears to have accelerated Friday’s explosive Treasury-market rally during a holiday-shortened session.

In eurodollar futures -- an analog of the Treasury yield curve -- early positioning data show there was wholesale dumping as initial reports about the omicron coronavirus variant threatened to knock down expectations for multiple Federal Reserve rate hikes next year. Staggering declines in open interest across a range of contracts in CME Group’s preliminary data suggest that exits from hawkish Fed bets helped fuel the extreme gains.

As soon as Powell planned a fake Taper, the forces of Untaper have gathered, from Janet on down to the public sector janitor to the retail trader.  The whole taper nonsense might boil down to a simple dodge and weave to save face at the Fed.

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