00:00You saw the chart that Mike just showed us of the 30-year term premium now at the highest since
00:042013.
00:05I mean, there's confusion, certainly, but how much of that is, let's say, inflation concern versus supply concern versus the
00:12economy is just doing really well and faster than people had thought it would grow?
00:18It is all of those things, and I think it is a misnomer.
00:22In the opening segment, there was a line by someone that, you know, there's a fear that the Fed is
00:27losing control of the long end.
00:29The Fed never has control of the long end of the curve.
00:32They don't have control of it.
00:33That's a fallacy.
00:34That is something that we got used to in the era of ultra-low and zero rates when every move
00:39the Fed made at the front end kind of had this ripple effect.
00:42Today, the long end is moving off of the things that it is supposed to move of, which is fiscal
00:47spending, inflationary backdrop.
00:49Yes, how is economic growth trending?
00:52And all of those things are pushing it higher, and is there an additional effect from things like the oil
00:58shock, from the uncertainty that the chairman's press conference created, possibly?
01:03These things are short-term, but in the longer term, structurally, the long end is moving off of supply-demand,
01:09which has been tremendous, off of the inflationary backdrop, and certainly the economic backdrop,
01:13which is why I think Fed hikes, everyone should understand they will arrive if we continue to see stronger than
01:20expected or consistently elevated inflation prints and or consistently strong economic growth.
01:28But essentially, what the Fed does at the front end matters even less today, frankly, than it did in the
01:34past.
Comments