Macro Dragon: The Fed Loooooooooves US Credit

Macro Dragon: The Fed Looooooves US Credit 

Top of Mind…

• So we finally get more details on how the Fed is going to be lifting corporate bonds in the US market (outside of ETFs) & it looks like individual corporate bonds will be bought under the SMCCF [Secondary Market Corporate Credit Facility].

• Here is an FAQ by the Fed on its Primary & Secondary corporate credit facilities [PMCCF & SMCCF]

• As well as further details tied to SMCCF including eligibility criteria. Obviously the theme of what we’ve mention in the Dragon all the way from 18^th of March - Macro Dragon: Pockets of Value Starting to Show - when we said credit had found a floor, continues as its all about front running the Fed – this is going to not just be a multi-quarter part… but multi-year party! Just look to the ECB who have been buying bonds for years.

• Again to the folks that say there is a lot of uncertainty out there, yes & no – as said multiple times, there has also never been MORE CERTAINTY… i.e. you can say with 200% probability that monetary policy is set to be accommodative from the Fed & ECB & Fiscal Policy is set to continue to be loose for both the US & EZ.

• This is a big deal, recall in a pre-C19 world, 80% of the battle is trying to figure out what is happening on FP or MP, and here we know with complete certainty… focus on the 1^st principle order of effects from that… as the trends from loose FP & accommodative MP tend to overwhelm a lot of the marginal smaller counter & often bearish trends

• Don’t get too caught up in the day to day noise – we went up because of liquidity (not because of fundamentals) & we will stay up, to accelerate up because of liquidity & we will also eventually come off because of lack of liquidity – bang for buck having run its course, yet that could be years away… watch the room on the Fed’s BS as a ratio to GDP, using BoJ & Japan as a mirror.

• And yes once again – nothing is off the table, be it YCC, negative rates nor the Fed/Treasury buying US equities.

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On The Radar Today

• AU: RBA Mins, Quarterly House Prices

• JP: BoJ

• UK: Claimant Count Change, Avg Erns Index, Unemployment Rate, Gilt Auctions

• EZ: GER ZEW, GER inflation

• US: Powell @ 22:00, Clarida @ 04:00, Retail Sales, Capacity Utilization, IP, Biz Inv.

• NZ: Milk Auction

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Start-End = Gratitude + Integrity + Vision. Create Luck. Process > Outcome. Sizing > Idea.


Namaste,

KVP