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A Textbook Case Of Mismanaging Everything, Everywhere, All At Once

 As Philip Marey covers in his latest report on the Fed, "The banking turmoil has strengthened markets' belief that the Fed is going to cut rates before the end of the year.

The implied policy rate path should be taken with a grain of salt, as the uncertainty about the rate path has increased substantially.

So markets are pricing in a stronger pivot, but the exact rate path has become less clear.

" That lack of clarity may have played a role in the ugly 2-year US Treasury auction yesterday, which also smacks of a textbook case of mismanagement - unless the Fed wanted to confuse markets about the rates path ahead. Meanwhile, we see mismanagement of data in market analysis.

Bloomberg just stressed that Fed support for banks, if not via rate cuts, implies either balance sheet expansion or credit easing via liquidity support.

ECB data show February, i.e., pre-crisis, already saw record deposit withdrawals from Eurozone banks due to rising rates.

Reuters says 'ECB tells banks to cut lending to indebted borrowers after binge', noting: "The ECB has told banks to cut lending to the most indebted borrowers, which could poke a hole in their balance sheets if the economy turns south or interest rates rise.

Leveraged transactions have grown to a EUR500bn pile on the books of the Eurozone's 28 largest lenders from EUR300bn in 2018 as record-low interest rates made banks seek returns in riskier parts of the market.

In Australia, Westpac CEO Peter King, speaking at a local banking summit, stressed the issue for struggling mortgage holders is the duration of higher rates.

" That's a 'guns or butter' political-economy choice that a single interest rate isn't going to help: too high, and you get neither guns nor 'butter'; too low, and you only get 'butter'.

The latter is a topic of conversation, as the Financial Times notes the worrying symmetry with the 1930's in the Japanese PM's recent visit to Kyiv as Xi Jinping visited Moscow: if you think the rates outlook is cloudy now, try looking at those dark storm clouds on the horizon.

https://www.zerohedge.com/markets/textbook-case-mismanaging-everything-everywhere-all-once

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