00:00Mark, your thoughts then post the Fed. There was quite a bit of hawkishness for those who wanted to see
00:05that both in the dot plot and indeed in what Kevin Walsh then had to say.
00:10How are you thinking about how Treasury markets behave and how many hikes we get then from the Fed?
00:17So I think it was definitely a hawkish FOMC. We've got to remember that the hike was not fully priced
00:22and it was unanimous.
00:23The median rate in the dot plot is higher. You know, I think so. Even going into the meeting, even
00:30all those people I know, including people on my own team who still thought a hike was folly and wasn't
00:36going to, you know, didn't want to believe it was going to happen a week ago, said, OK, fine, maybe
00:40they'll deliver a dovish hike.
00:41It wasn't a dovish hike. It was a hawkish hike. So I think that that restores credibility to the market.
00:47That's a good thing for bonds.
00:48It's a good thing for stocks, ultimately. Now, I don't think it's a big driver of stocks, but I think
00:52it is ultimately supportive that we're getting, you know, the most important central bank in the world is saying, hey,
00:57we're actually going to take our job seriously again.
00:59Something that's been in doubt for the last two years. So I think that's a very positive message.
01:03I'm slightly surprised the curve hasn't flattened more. Long end bonds have done well.
01:08But as you pointed out, I think the biggest driver at the moment is really oil prices.
01:11I still think oil prices have an asymmetric risk for bigger downside moves than upside moves ever since Trump added
01:19the risk premium last week.
01:20I don't know the path what's going to happen in the Middle East, but I think the next big move
01:23is lower.
01:25By the dollar?
01:29I think the dollar has more upside in the same way that I think treasuries should rally from here on
01:35the impetus towards more Fed credibility and taking the inflation mandate seriously.
01:40More through flattening. And, you know, maybe maybe the treasuries move won't go as far as I was kind of
01:46previously hoping if they're going to be really kind of raising rates more at the front end.
01:50But that restoration of credibility, that idea that it was a hawkish Fed.
01:54Yeah, I think the dollar has more upside. Remember, this is this is maybe a slight hawkish shift from where
01:59we were 24 hours ago, but it's quite a big hawkish shift from where we were a week ago.
02:03And it's a very big hawkish shift from where we were a month ago. And I don't think that's fully
02:07priced in yet.
02:08So, yeah, I think dollar is more upside. I think treasuries have more upside.
02:12And where does that leave the rest of the world and central banks then, Mark?
02:16We were just having a conversation about the Bank of England. We still got the BOJ to come.
02:22I think, you know, generally it puts upward pressure on yields in the front end around the world if they
02:29weren't already so high.
02:31So what it does is it gives central banks the kind of cover or the pressure to deliver on the
02:37on the aggressive hikes that are now priced in many places.
02:40Of course, the Bank of England won't hike today, but I think it actually puts them in a tough spot
02:44because they're one of the few central banks who are not priced to hike at the immediate meeting.
02:48And therefore, they're going to be like, you're the one who's behind the curve.
02:51And I think that puts more pressure on sterling as a result. Bank of Japan will surely hike.
02:56But again, it puts pressure on the currency because now they've got to deliver a very hawkish hike to change
03:02the upward momentum in dollar yen, which has fully restored itself.
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