Category Archives: Interest

The ‘Real’ Reason the Fed Wants to Raise Rates

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By Biiwii

In case you thought you were smart enough to know why the Fed wants to do what it supposedly wants to do [1] MarketWatch sets you straight with the real scoop. We’ll use this as a talking point and see what comes of it…

Here’s the real reason the Fed wants to raise rates

Policy makers want to give themselves some room to maneuver

That is the commonly held belief and who am I to dispute it? A big part of the problem is and has been their refusal to begin a journey toward normalization 2 years ago, when the economy began to visibly (we noted the seeds of that improvement in January of that year) improve. They had no confidence and I was left to wonder (aloud here, frequently and I am sure, sometimes obnoxiously) why Grandma [2] (and her 0% savings account payout) had to continue to bear the brunt of this non-action despite a recovering economy.

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New Up-Leg Emerging for Yield?

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During the past 3-4 weeks, my preferred scenario called for the 10-year Yield to stall at around 2.50% followed by a decline into the 2.10-2.00% support zone prior to my expectation of the emergence of a new up-leg that propels Yield to 2.90-3.00%.

That said, however, my near-term pattern work is warning me that last week’s (Jul 9) low at 2.17% followed by a sharp rally to yesterday’s high at 2.47% signifies the end of a June-July correction and the initiation of a new up-leg.

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Bonds – A Summer Projection

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I said on Wednesday morning that I was looking for a slightly lower low on TLT before a likely full retracement of the last move down. After that lower low and the wedge breaking up i was wondering whether an IHS might form at the obvious possible IHS neckline at the 50% fib retrace. On the ZB (30yr treasury future) below you can see that ZB reversed on Friday at that 50% fib (TLT reversed a little lower) and if this IHS continues to form then on a break over the neckline the target will be the 100% retracement of the last move down that I was looking for last Wednesday. ZB 60min chart:

150614 ZB 60min IHS Projection

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