Why the Fed won’t taper until 2014
3 posters
Page 1 of 1
Why the Fed won’t taper until 2014
Why the Fed won’t taper until 2014: Bond guru
Published: Wednesday, 25 Sep 2013 | 7:07 AM ET
By: Alex Rosenberg | CNBC Producer
[You must be registered and logged in to see this link.]
It's the market's most important question. And this expert says that traders are getting the answer all wrong.
Now that the Federal Reserve has shocked the market by maintaining the pace of its asset purchases, the market desperately wants to know when the Fed will, in fact, begin to taper its quantitative easing program.
Some speculate that the Fed will announce tapering in its December statement, while others contend that tapering could come as soon as October. But David Robin, senior vice president at Newedge, makes a strong case that a tapering announcement is still further away than many think.
"I don't think they start tapering until the early part of 2014," Robin told CNBC on Tuesday's "Futures Now."
For Robin, October is out of the question. First of all, if economic conditions don't yet support a reduction of quantitative easing, then they still won't support tapering in a few weeks.
"Even if you get a strong payroll number in the early part of October, you're still going to have an above-7-percent [unemployment] rate, you're still going to have smoothed-out nonfarm payrolls growth below 200,000," Robin said. "That is not the recipe for removing tapering."
(Read more: 'No taper' shouldn't have been a surprise: NY Fed boss)
Plus, there is a logistical problem with tapering in October. As Robin points out, there is no press conference scheduled to follow the Fed's Oct. 30 statement. That means that Fed Chairman Ben Bernanke wouldn't be given a chance to ease the market's concerns following any tapering announcement.
[You must be registered and logged in to see this image.]
Pete Marovich | Bloomberg | Getty Images
Ben S. Bernanke, chairman of the U.S. Federal Reserve
But why wouldn't the Fed announce tapering in December?
Well, President Barack Obama is seeking a successor for Bernanke, and now thatLarry Summers has taken himself out of the running, a Janet Yellen appointment appears likely. Robin believes that Yellen will indeed be the next Fed chair, and that's actually why he thinks the Fed won't taper in December.
"Odds are that it's Janet Yellen, odds are that it's Janet Yellen's first meeting," Robin said. "Unless the data is substantially stronger than it is now, I'm hard-pressed to see her first decision at the first meeting to be starting to remove stimulus when she's even on the more dovish side of Bernanke."
Because he believes that both October and December are out, Robin says he's "hard-presed to see any sort of tapering action until 2014."
(Read more: Some traders got 'no taper' decision news earlier)
That could mean Treasury yields have some more room to the downside.
On Tuesday, the 10-year yield fell to 2.65 percent. But Robin says it will close the year "below 2.5, probably close to 2.35 in a continuation of a nontapering, lower-for-longer environment."
—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.
Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. EDT exclusively onFuturesNow.CNBC.com!
( http://www.cnbc.com/id/101059760 )
Text Size
Published: Wednesday, 25 Sep 2013 | 7:07 AM ET
By: Alex Rosenberg | CNBC Producer
[You must be registered and logged in to see this link.]
It's the market's most important question. And this expert says that traders are getting the answer all wrong.
Now that the Federal Reserve has shocked the market by maintaining the pace of its asset purchases, the market desperately wants to know when the Fed will, in fact, begin to taper its quantitative easing program.
Some speculate that the Fed will announce tapering in its December statement, while others contend that tapering could come as soon as October. But David Robin, senior vice president at Newedge, makes a strong case that a tapering announcement is still further away than many think.
"I don't think they start tapering until the early part of 2014," Robin told CNBC on Tuesday's "Futures Now."
For Robin, October is out of the question. First of all, if economic conditions don't yet support a reduction of quantitative easing, then they still won't support tapering in a few weeks.
"Even if you get a strong payroll number in the early part of October, you're still going to have an above-7-percent [unemployment] rate, you're still going to have smoothed-out nonfarm payrolls growth below 200,000," Robin said. "That is not the recipe for removing tapering."
(Read more: 'No taper' shouldn't have been a surprise: NY Fed boss)
Plus, there is a logistical problem with tapering in October. As Robin points out, there is no press conference scheduled to follow the Fed's Oct. 30 statement. That means that Fed Chairman Ben Bernanke wouldn't be given a chance to ease the market's concerns following any tapering announcement.
[You must be registered and logged in to see this image.]
Pete Marovich | Bloomberg | Getty Images
Ben S. Bernanke, chairman of the U.S. Federal Reserve
But why wouldn't the Fed announce tapering in December?
Well, President Barack Obama is seeking a successor for Bernanke, and now thatLarry Summers has taken himself out of the running, a Janet Yellen appointment appears likely. Robin believes that Yellen will indeed be the next Fed chair, and that's actually why he thinks the Fed won't taper in December.
"Odds are that it's Janet Yellen, odds are that it's Janet Yellen's first meeting," Robin said. "Unless the data is substantially stronger than it is now, I'm hard-pressed to see her first decision at the first meeting to be starting to remove stimulus when she's even on the more dovish side of Bernanke."
Because he believes that both October and December are out, Robin says he's "hard-presed to see any sort of tapering action until 2014."
(Read more: Some traders got 'no taper' decision news earlier)
That could mean Treasury yields have some more room to the downside.
On Tuesday, the 10-year yield fell to 2.65 percent. But Robin says it will close the year "below 2.5, probably close to 2.35 in a continuation of a nontapering, lower-for-longer environment."
—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.
Watch "Futures Now" Tuesdays and Thursdays at 1 p.m. EDT exclusively onFuturesNow.CNBC.com!
( http://www.cnbc.com/id/101059760 )
peanut- Senior Member
- Posts : 3508 Credits : 3762 Reputation : 149
Join date : 2012-04-06
Re: Why the Fed won’t taper until 2014
+1 midnight poster!
kppl- Senior Member
- Posts : 2270 Credits : 2611 Reputation : 150
Join date : 2012-01-31
Stock Portfolio : AIG, DHI, ORCL, CSCO, BRK.B
-ve
Re: Why the Fed won’t taper until 2014
+1
so to indicate clearly when is it going to end.
what is the target again ? 6 %?
so to indicate clearly when is it going to end.
what is the target again ? 6 %?
Cals- Administrator
- Posts : 25277 Credits : 57721 Reputation : 1766
Join date : 2011-09-08
Location : global
Comments : “My plan of trading was sound enough and won oftener that it lost. If I had stuck to it Iâ€d have been right perhaps as often as seven out of ten times.â€
Stock Exposure : Technical Analysis / Fundamental Analysis / Mental Analysis
Similar topics
» US Fed on track to taper in March
» Equities 2014 KLCI can surpass 1,980 points by end-2014, say market players
» KLCI records among worst week in 2014 Friday, 5 December 2014 By: JOSEPH CHIN
» Yellen may emulate taper template
» Why Asia should welcome the Fed taper this time: William Pesek
» Equities 2014 KLCI can surpass 1,980 points by end-2014, say market players
» KLCI records among worst week in 2014 Friday, 5 December 2014 By: JOSEPH CHIN
» Yellen may emulate taper template
» Why Asia should welcome the Fed taper this time: William Pesek
Page 1 of 1
Permissions in this forum:
You cannot reply to topics in this forum
|
|