US Yield Curves Blowing Out

As long time Magnelibra readers know, we have emphasized the idea that global inverted yield curves would eventually force the FOMC to reverse their rate hike regime. Now this weekends emergency FOMC/Treasury bailout of the entire banking sector and yes we do mean ENTIRE, has essentially put a halt to the FOMCs rate hikes. This emergency measure came with an unlimited “Any Institution under FDIC regulatory framework” we aren’t sure how their 13(3) mandate can allow for such a broad stroke, none the less it is the reality. This is not how the free markets are supposed to work, but rather it is how the FOMC has operated for the greater part of the last 3 decades. For those that want to read the extreme measure here is the link, FOMC BTFP

Anyway, we all know that the if the real problem is INFLATION, then we can’t wait for the contagion excuse for the rationale to expanding their balance sheet once again. We would expect the balance sheet to rise to $8.5T from the current $8.3T at the minimum here next week, as banks take advantage of this new found free money.

So how have the markets been taking this? Asia/EU session saw the Nasdaq up over 200 points on its highs, but as NY came in the selling started with much of the market still lower but the Nasdaq still holding on to small gains. The Russell2k is the weak link down 1.5%:

Source: CQG, Magnelibra.substack.com