Editor's Note: Below is a brief excerpt from an institutional research note written by Hedgeye Senior Macro analyst Darius Dale. To access our institutional research email firstname.lastname@example.org. For more on the subject of central planning check out analysis via Hedgeye CEO Keith McCullough here and Dale here.
- While the BoJ underwhelmed near-term easing expectations in the most confounding of manners, a detailed review of their policy statement in the context of preexisting cyclical and structural growth and inflation dynamics suggests incremental easing is likely to come in the not-too-distant future.
- Looking beyond the immediate-term TRADE duration, it’s safe to conclude that the potential for a protracted JGB “tantrum” has been dramatically reduced and the key implication of dramatically-reduced JGB “tantrum” risk is reduced upward pressure on U.S. interest rates.
- With respect to the Fed, if it looks like a dove, walks like a dove and coos like a dove – it’s probably a dove. Looking beyond the [likely] December rate hike guidance inserted into today’s FOMC statement, both the Summary Economic Projections and Yellen press conference offered a slew of dovish takeaways.
- Moreover, the confluence of their ongoing “data dependence” and our dour outlook for the U.S. economy and the labor market imply the 10Y Treasury yield’s intraday high of 1.73% may represent the peak of 2016 rate hike fears.
- All told, we reiterate our bullish bias on Treasury bonds and defensive (i.e. non-cyclical) dividend yields in the context of our “lower-for-longer” and #LateCycle slowdown themes, having likely just survived yet another round of [largely ungrounded] consensus fear of higher rates.