ββ#ForexChief #Yellen #forexnews #Fed #worldnews #ManufacturingPMI #Powell #BankOfEnglandβ
β‘ Yellen nervous: weak liquidity threatens the stability
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π The decrease in the level of liquidity in the Treasury market creates real problems for the US Treasury. Ten days ago, Jeannette Yellen warned about the beginning of the redemption of a certain amount of old debt. Yesterday it began direct consultations with primary dealers in the US government debt market on the possibility of such a transaction.
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Recent events in the UK, more precisely, the forced intervention of the Bank of England, may prompt the US Treasury to start thinking about revising its policy. If the liquidity of US government debt drops critically, it will be a real shock to world markets. It is quite understandable why the highly experienced Lady Treasury sounded the alarm.
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However, such actions mean a conflict with Powell's tough policy: the Fed is selling UST from its balance sheet as part of QT, and the US Treasury is considering options for buying out debt assets.
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According to the forecasts of the US Mortgage Bankers Association, the US economy may enter a recession from the beginning of 2023, and according to the results of the NABE survey, the country is already in recession.
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The slowdown in business activity is clear: the Manufacturing PMI fell to 49.9 from 52 in September, and the Services PMI fell to 46.6 from 49.3. Now it remains to wait for the decline in labour market indicators, but then it will be too late to react.
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How does this threaten us, ordinary traders?
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If the US Treasury starts buying back debt (although this is impossible without the Fed's decision), then the markets will get a powerful, almost uncontrollable rally, to which even large players will not be able to adequately respond. And the Β«market planktonΒ» with their losses will only hasten this catastrophe, although the most courageous of us can count on additional profit from such a rally. But you need to clearly understand how risky it is. Of course, it is still too early to panic, but you need to tighten your money management right now.
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Profits to yβall!