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20 Jun 2013
Flash: From zero rates in US to low rates - Societe Generale
FXstreet.com (London) - Kit Juckes at Societe Generale explains that they see lots of people debate whether Bernanke was as hawkish as market action suggests.
“He wasn't, and that is no more 'the point' than the absence of inflation. We are transitioning from a "zero rate, no volatility" US rate world to a "low rates, low volatility" one, and since the former was the perfect recipe for "carry trades" from credit to EM to MBS and beyond, the adjustment is brutal.” Kit Juckes still thinks a 2.5pct 10yr Note yield (if that's where we head next) is low in an economy with nominal GDP growth of 3.5-4.5 pct. “So although Bernanke wasn't that hawkish, the adjustment isn't over”.
“He wasn't, and that is no more 'the point' than the absence of inflation. We are transitioning from a "zero rate, no volatility" US rate world to a "low rates, low volatility" one, and since the former was the perfect recipe for "carry trades" from credit to EM to MBS and beyond, the adjustment is brutal.” Kit Juckes still thinks a 2.5pct 10yr Note yield (if that's where we head next) is low in an economy with nominal GDP growth of 3.5-4.5 pct. “So although Bernanke wasn't that hawkish, the adjustment isn't over”.