Guys just wanted to get these out there before this afternoon’s FOMC decision where its widely expected that the FOMC will cut by 25bp. As we noted yesterday we do not expect the them to disappoint or surprise the market due to the high election volatility!
We hope we will gain a better understanding of the FOMCs path forward and considering a Trump/Vance administration now, we would expect rates to continue their downward path to assist the US Treasury in their overall total interest costs they are paying on their debt. We know this is a transfer of massive risk free wealth at the cost of higher interest costs to the government.
We have also seen a reduction in the negative carry this year. This is our third year in a row by which the Fed Funds has been higher than the US Govt 10Y rate, this is a huge detriment to levered players.
Levered players are used to enjoying the forward rates being super low so when they need to refinance its always at a favorable rate in the future, well the…
