Remember folks…. the Fed FOLLOWS the market, it does not lead it.
“Davidson” submits:
The Fed cut the Fed Funds rate to a mid-point 1.12% yesterday, but T-Bills declined to 0.81% as of this morning. This leaves a window of ~0.3% below yesterday’s Fed Funds reset. The Fed follows market rates. We can expect another 0.25% adjustment lower shortly if the Fed follows past patterns. The T-Bill/10yr Treasury rate spread turned positive on yesterday’s yield curve and is likely to expand going forward should market psychology improve. A positive signal to many algorithms for banks and industrials.
Lower rates in the US make the US 10yr Treasury less attractive as a global safety net. The US$ has already traded ~2% lower. Stopping the influx of foreign capital is beneficial for US industrials and historically correlated to higher commodity prices including $WTI(West Texas Crude Oil Price).
