Submitted by Taps Coogan on the 2nd of June 2019 to The Sounding Line.
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CNBC’s Rick Santelli recently explained why he believes that a weak European economy and too accommodative policy for too long may have more to do with falling Treasury yields in the US than domestic concerns.
Some excerpts from Rick Santelli:
“At issue here is why interest rates in the States are going so far down and of course the message it sends, whether you want to talk inversions, 3-month to 10-year inverting the most it has since 2007… Let’s look at the relationship between (the 10-year Bund) and the 10-year (treasury)… The spread is hanging constant and if the spread is hanging constant and as rates drop on the Bunds, if 80% of that contributes to the downside in (10-Year Treasuries), what is Jay Powell gonna do about that? There is literally nothing the Fed can do about that. Dave Wessel said: “It isn’t all doom and gloom, just a little bit of gloom’ and I agree with that because there is no way equity traders or any investors in the States are going to be looking at a 3-month bill yielding 2.35% and then think ‘Hey do I want to get involved with a 10-year at 2.25%’ and the relationship is going to keep compressing. And the flatter and more inverted the yield curve gets, the more nervous it makes the central bank. What can (Jay Powell) do about it? …Call Mario and say ‘Hey Mario, you should have started tightening a while ago. You’re gone in October.’ Cause that’s about the only thing that’s going to help us out as we get closer to 2%.”
There is more to the interview, so enjoy it above.
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