When is the Fed's "Taper Telegraph" Coming? - Real Time Insight
22 5월 2013 - 1:25AM
Zacks
We have come to expect certain things from the
most transparent, and most aggressive, FOMC in history. Besides
knowing exactly what they are going to do and why, we get a lot of
lead time about policy changes.
And we get to hear a lot of dialog among all the
economist participants, both voting and non, about their views of
the economy and Fed policies in frequent speeches every month. I
started keeping track of the messages from the growing hawkish wing
in the summer of 2011.
Now the hawkish ranks have grown to at least six
in the last few quarters: Fisher, Plosser, Lacker, Kocherlakota,
Bullard, and George. These folks are increasingly concerned about
the size of the Fed's balance sheet and its distorting effects on
the bond and equity markets.
This month, 10-year Treasury yields did an
about-face back up to nearly 2% (from their drop to 1.6% in March
and April) a couple of days after the last FOMC meeting adjourned
on May 1.
And though everyone seemed to get really excited
after the WSJ Hilsenrath article on May 10 which seemed to be "the
leak" about upcoming reductions to QE3 bond buying, Bloomberg
published an excellent piece on the "taper" topic on May
1.
Today, with fresh FOMC minutes due tomorrow
afternoon and Bernanke testifying about the outlook for the economy
before the Joint Economic Committee of Congress in the morning, our
own Sheraz Mian has come out with his bold prediction that the Fed
will announce some kind of change to the QE3 bond buying policy at
the June 18-19 meeting.
His logic is simple and consistent with what he
has been saying for months now: the Fed is buying all the
Treasury new issuance and it must start paring back -- especially
since the deficit is lower and the US actually needs to slow
the pace of debt sales (Sheraz says the CBO projects the
deficit this year will be $200 billion lower than their estimates
of 3 months ago).
And here's the real meat of Sheraz's piece: if
the Fed doesn't begin to taper soon, the current schedule of bond
buying will in effect be like increasing QE to keep rates
artificially low.
So, will the Fed make policy changes that begin
"the taper" at the June meeting, or will they only "telegraph"
what could be coming and wait until September for actual
reductions in bond buying?
Regardless of June or September, what impact will
this beginning of the end for QE have on the housing market and
it's related stocks? Tracey pointed out to me this morning that
Home Depot (HD) is now about 80% above its 2005-06
housing bubble highs!
And the iShares Home Construction Index
ETF (ITB), with a P/E of 285, is up over 200% since the
2011 lows.
Finally, are any policy moves affected by the
fact that Bernanke could be "outa here" next year and therefore he
needs to start clearing a path for the exit strategy of his grand
design?
HOME DEPOT (HD): Free Stock Analysis Report
ISHARS-DJ HO CO (ITB): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
ISHARS-BR 20+ (TLT): ETF Research Reports
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