Lanceljx
10-09 10:55

I think the long end can stay elevated, or even move higher, even if the Fed stands pat.


The key issue is that the 10Y/30Y are increasingly being driven by more than the expected Fed path. Fiscal deficits, heavy Treasury issuance and a rising term premium can keep pushing long-term yields higher without another rate hike.


A Fed pause may relieve some pressure at the front end, but it does not automatically solve the supply-demand imbalance further out the curve. If investors demand more compensation to hold duration, the curve could steepen through higher long-end yields.


For equities, that matters because a 5%+ 10Y keeps the discount-rate hurdle high, particularly for expensive growth stocks.


My base case: Fed pause ≠ long-end relief. I would watch Treasury auctions, term premium and inflation expectations more closely than the next Fed meeting alone.

Last Speech Before Blackout: What Will Warsh Say?
Fed Chair Warsh speaks in Bangkok on October 16 Beijing time, the last official comment before the FOMC blackout ahead of the October 27–28 meeting. Markets price about 80% odds of no move in October and similar odds of a December hike: QQQ closed Thursday -1.34% at $747.58, SPY -0.42% at $773.93. On October 7 the 10-year hit 5.366% and the 30-year 5.728%, both highest since 2002. Bulls say the hold is priced and a non-hawkish speech lifts an overhang; bears say term premium and fiscal imbalances drive the long end, and the Fed can't fix either. What do you want to hear from Warsh?
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Comments

  • DIAMOND009
    10-09 17:02
    DIAMOND009
    Demand side matters too — foreign official buying and household appetite have both softened, and that can keep term premium sticky even on a Fed pause
  • BartonBecky
    10-09 17:02
    BartonBecky
    Yup, a Fed pause does not fix duration repricing. For growth names, 5% on the 10Y is enough to keep multiples under pressure.
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