The ‘Great U-Turn’

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US Monetary Policy After The 'Great U-Turn'

 

'True' Fed Funds policy rates (incorporating the effects of QT) are nearer 5-6% on our estimates than the stated 2½%. This 'tight' monetary stance is unsustainable and will be followed by a substantial monetary easing in both US and World Markets. On top, a structural shortage of 'safe' assets and soft economy will underpin bond returns. We expect a yield curve steepening, led by falling near-term maturities, and rising bond market volatility.

 

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