(Larry Downing/Reuters)
Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: FOMC meeting, tech stocks tumble, Treasurys climb, and the risks of forward guidance.
FOMC Meeting
Investors are once again testing the adage, “Don’t fight the Fed.” The Federal Reserve Open Markets Committee (FOMC), which is holding a press conference this afternoon, has for months signaled that it does not intend to raise interest rates until at least 2024. But since February, yields on U.S. Treasury notes have moved up, implying three rate hikes in 2023.
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Since the 2008 financial crisis, investors anticipating monetary tightening have generally been clobbered, and while bets against long-dated Treasuries have paid off for some in recent months, recent history indicates that the Fed wins battles with Wall Street. Today’s press conference is unlikely to reveal anything new in the way of policy, but it will indicate the extent to whic
China s Tech Crackdown Continues -- The Capital Note
nationalreview.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from nationalreview.com Daily Mail and Mail on Sunday newspapers.
Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: China’s tech crackdown, Dalio’s dollar doom, Ashworth’s response, and a look at China’s advantages in entrepreneurship. CCP Comes Down on Tech CEOs In October 2020, Jack Ma delivered mild criticisms of China’s financial regulators at a business conference. Within a week, the tech billionaire’s payments company, Ant Financial Group, saw its IPO halted after Ma was summoned to a meeting with financial regulators. Shares of Tencent and Alibaba, the country’s largest tech companies, subsequently plummeted as investors saw the incident as an indication of a broad crackdown by the Chinese Communist Party (CCP) on tech entrepreneurs. Chinese president Xi Jinping confirmed those suspicions on Monday, stating in a meeting with financial regulators that the government should take a harder line against “platform” companies. “Som
A “storm” swept through the US government bond market on Friday, sending a key measure of long-term borrowing costs to the highest level since last February.
Treasuries dropped in overnight trading after a large sale of long-dated bond futures in Asia, according to people familiar with the matter. Yields on the benchmark 10-year note, a key marker across global asset markets, jumped to 1.63 per cent, having traded around 1.53 per cent the day before.
Analysts said the scale of the move underscored how jittery the $21tn market had become against the backdrop of a more robust economic rebound. Treasuries are the biggest and deepest market in the world, something that typically insulates it from sharp rises and falls in prices.
Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: the reflation, mortgage rates rise, Deliveroo’s IPO, and a look at equity duration during a pandemic. To sign up for the Capital Note, follow this link. The Reflation Is Here Investors are selling bonds in droves on the expectation of higher inflation. The U.S. ten-year yield now stands at 1.5 percent, near its pre-pandemic level, following a 10 percent decline in ten-year Treasury prices. The magnitude of the sell-off mirrors 2013’s so-called taper tantrum, when a pullback in Federal Reserve asset purchases sent bond prices plummeting. This time around, the dynamic is reversed: Investors are responding to an overly accommodative central bank, betting that growing aggregate demand will push inflation up. That’s tempered partially by a change in interest-rate expectations. The Fed has guided near-zero rates until roughly 2024, but investors have priced in three rate
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