Hi Jeff! I was wondering if you have a view on where the USD is going this year or in the near future, say, Q1 and Q2? I am quite tempted to add some short-term US treasuries, but it's not my base currency, so I have to assess currency devaluation before adding positions that yield 4% per annum at best.
I suppose a stubborn labor market could lead them to over-hike or maintain a hawkish stance, but then, getting what they're after should favor that move into bonds that will make your long bond trade really shine. Thanks!
Regarding USD, due to other central banks (esp Japan) raising rates and acknowledging the need to fight inflation it will keep a lid on the USD for now. But the US is like the best house in a bad neighborhood where all the other countries are doing much worst than the US is—notice US is months ahead on inflation receding when looking at CPI and Europe has just likely peaked and Japan is still rising.
So for next Q1-Q2 I think USD will also trade sideways and it has likely carved out a bottom heading into 2023. It will spike again when a flight to safety is triggered if other developed economies go into deeper than expected recessions.
I will go hard into TLT when the Fed pivots or pauses on rate hikes—it means something bad has happened and bonds will be flight to safety. For now my TLT position is just slowly accumulating, there is a potential for TLT to retest lows after another FOMC mtg stressing higher for longer, but it’s a hedge against something likely breaking and recession (demand destruction).
So I’m just taking my time averaging in slow with low limit orders, TLT has seen net inflows 2022 and I believe a bottom has already formed.
Yes, that BOJ interest rate ceiling expansion got me a bit jittery on whether the dollar can handle both a policy change by Kuroda (or his successor) and the ECB hawkish stance materializing into higher rates. That would pressure the dixie lower. Q4 saw a pretty sharp drop too... I think sideways is somewhat consensual.
I am also *very* interested in TLT. In fact, I might just open a small position here since I have none – that was a decent correction from 110, even if we go lower. The technicals are still clearly bearish, but at at these levels and given the multi-year deviation, it's a good hold for the right time horizon. Also, as you said, the bottom could potentially be in given recession expectations.
A bit random: have you looked at Mexican bonds? Strong currency, massive yield. It might be worth the risk/reward with low default risk.
Hi Jeff! I was wondering if you have a view on where the USD is going this year or in the near future, say, Q1 and Q2? I am quite tempted to add some short-term US treasuries, but it's not my base currency, so I have to assess currency devaluation before adding positions that yield 4% per annum at best.
I suppose a stubborn labor market could lead them to over-hike or maintain a hawkish stance, but then, getting what they're after should favor that move into bonds that will make your long bond trade really shine. Thanks!
Regarding USD, due to other central banks (esp Japan) raising rates and acknowledging the need to fight inflation it will keep a lid on the USD for now. But the US is like the best house in a bad neighborhood where all the other countries are doing much worst than the US is—notice US is months ahead on inflation receding when looking at CPI and Europe has just likely peaked and Japan is still rising.
So for next Q1-Q2 I think USD will also trade sideways and it has likely carved out a bottom heading into 2023. It will spike again when a flight to safety is triggered if other developed economies go into deeper than expected recessions.
I will go hard into TLT when the Fed pivots or pauses on rate hikes—it means something bad has happened and bonds will be flight to safety. For now my TLT position is just slowly accumulating, there is a potential for TLT to retest lows after another FOMC mtg stressing higher for longer, but it’s a hedge against something likely breaking and recession (demand destruction).
So I’m just taking my time averaging in slow with low limit orders, TLT has seen net inflows 2022 and I believe a bottom has already formed.
Yes, that BOJ interest rate ceiling expansion got me a bit jittery on whether the dollar can handle both a policy change by Kuroda (or his successor) and the ECB hawkish stance materializing into higher rates. That would pressure the dixie lower. Q4 saw a pretty sharp drop too... I think sideways is somewhat consensual.
I am also *very* interested in TLT. In fact, I might just open a small position here since I have none – that was a decent correction from 110, even if we go lower. The technicals are still clearly bearish, but at at these levels and given the multi-year deviation, it's a good hold for the right time horizon. Also, as you said, the bottom could potentially be in given recession expectations.
A bit random: have you looked at Mexican bonds? Strong currency, massive yield. It might be worth the risk/reward with low default risk.