US: Wait for Ms Yellen’s speech - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the market’s default position is to wait for Ms Yellen’s speech and then conclude that the Fed will still only be hiking rates so slowly that we’ll hardly notice when they eventually do.

Key Quotes

“That’s not a recipe for either volatility or much in the way of dollar strength. Even so, having fallen 8% on a trade-weighted basis since real Treasury yields started falling in January, the dollar is still 25% higher in value than it was four years ago as rally was just getting going. Those real yields matter. 10yr TIIPS yields fell by 90bp to -0.1%, but have edged back up a bit and the context for the Fed’s rethink on monetary policy is that 10-year real yields are barely above zero. I’d rather be short TIIPS than long them at these yields and if that’s what’s driving the dollar then.”