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14 Jun 2013
Flash: Fed taper priced in - RBS
FXstreet.com (Barcelona) - The market-induced illusion that the Fed may start its tapering in the near term appears to be now priced in, with the market expecting now a reduction in the pace of QE within 3 months, says Greg Gibbs, FX Strategist at RBS.
Gibbs reminds the reader that the Fed remains committed to low rates until the economy has growth above its potential for probably more than two years, thus "yields should rise only so far" Gibbs notes.
The Strategist adds that "the US economy cannot sustain above potential growth if yields rise too far, it still relies on easy monetary conditions to carry its still significant debt load."
The rise in the value of US Treasuries and the SP500 on WSJ's Hilsenrath article this Thusday, according to Gibbs, "is a sign that the market is still aware that rates are not likely to be raised for a long time and is comfortable with Fed beginning to slow the pace of its still ongoing policy easing."
Gibbs reminds the reader that the Fed remains committed to low rates until the economy has growth above its potential for probably more than two years, thus "yields should rise only so far" Gibbs notes.
The Strategist adds that "the US economy cannot sustain above potential growth if yields rise too far, it still relies on easy monetary conditions to carry its still significant debt load."
The rise in the value of US Treasuries and the SP500 on WSJ's Hilsenrath article this Thusday, according to Gibbs, "is a sign that the market is still aware that rates are not likely to be raised for a long time and is comfortable with Fed beginning to slow the pace of its still ongoing policy easing."