Interest rates to fall?

Just come across this strange prediction by UBS. Can’t see it myself.

UBS Investment Bank’s Arend Kapteyn and Bhanu Baweja have forecasted that the Federal Reserve will start on a substantial monetary policy easing cycle, cutting interest rates by a remarkable 275 basis points in the coming year. This projection is nearly four times more aggressive than what the markets are currently pricing. The strategists argue that a persistent decline in inflation will create favorable conditions for the central bank to initiate policy adjustments as early as March, with rate reductions expected to be substantial, mirroring a typical easing cycle.

If they need to shift this lot of treasuries I’d bet on rates going up. They would have to be in double figures for me to buy any:

Over the 10 months between June 1 2023 through March 31, the government will have added $2.85 trillion to the marketable debt…

…So US investors, pension funds, insurance companies, bond funds, etc., need to be persuaded to step up to the table and buy those securities. And to pull ever more buyers to the table, yields have risen, and the tsunami of new issuance indicates that even more buyers, reluctant buyers, will have to be pulled in with even higher longer-term yields to come.

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The Federal Reserve typically eases during an election year to stay in the good graces of the incumbent. There’s only a tiny consituency for high interest rates.



A lot of lying going on. Who would ever believe Wall Street lies?

I must be wrong.

Buy buy buy! Rates are going down.

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This rumor – of falling interest rates any day now – seems to come up every few weeks.

Wall Street thinks it’s always time to buy. That may well be true but its important to pick the right ones.

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It is probably not true.