Is The Federal Reserve'S Decision To Raise Interest Rates A "Policy Error"?

Deutsche Bank has publicly stated that if the Federal Reserve decides to raise interest rates, it will be a "policy mistake".

Deutsche Bank's view is clear: "the goal of the Federal Reserve is to slow down credit growth, and this goal is easier to achieve in the absence of liquidity in the market.

If the Fed raises interest rates, it seems to mean that the central bank officials will also intervene in the issue of the exchange rate of the US dollar against the RMB. The two currencies can not afford much risk at the moment, so they all hope to maintain the stability of the exchange rate.

Admittedly, Deutsche Deutsche remembers to retouch the truth, so it added: "the prospects for the US economy, the Fed and the Chinese economy are not dim, but in terms of interest rates, we think we should take precautionary measures to prevent the bad situation.

The trend of interest rates is based on the degree of the Federal Reserve's fiscal tightening, the sensitivity of credit creation, and the development of the Middle East and China, so we should not underestimate the extent of its decline or keep it at a low level.

The credit pressure faced by the market appears to be rapidly emerging.

Just like ours.

The bond strategist said that the market situation is not enough to cause people to "ignore" other potential threats because of the disaster of credit only in one department.

Crises usually break out in one sector and then spread to other sectors.

The reason why the crisis is contagious is that there should be no leveraged and forced selling and forced refinancing at that time.

To sum up, the "unofficial" information of Deutsche Bank is like this: there is no so-called "perfect contraction" at all. Tightening measures are the beginning of the fourth round of the quantitative easing policy and / or negative interest rate policy of the Federal Reserve. The beginning is to absorb the liquidity of the market at 6000-8000 billion US dollars, and if the interest rate rises to 1%, the cost can even rise to 3 trillion dollars.

At that time, the market will pressure Janet Yellen, chairman of the Federal Reserve, from two aspects, forcing it to take immediate measures to relax: triggering a sell-off in the stock market and reversing the curve, suggesting that the recession is imminent.

Even Deutsche Bank, who tries to maintain neutrality, thinks that the Fed will raise short-term interest rates (even if the Fed is forced to cut interest rates quickly and return to its low level after the interest rate hike is raised, or what the Wall Street Journal reporter Hilsenrath hinted yesterday is worse). How should it invest in the short term? Here are two options for trading in the next few days recommended by Konstam. Some may say that this is actually a paction.

Perhaps the standard & Poor's 500 index needs to fall several times to stop the pace of the Federal Reserve's fiscal tightening. This is not impossible, but we need not be so pessimistic.

If the Fed raises interest rates, what will happen next? How much can the central bank actually cope with?

The increase in interest rates of the central bank depends entirely on the speed of its realization.

The goal is not to raise inflation, otherwise central bankers will not choose to raise interest rates.

The goal is not to reduce unemployment, because it does not belong to the central bank's right.

The real goal of the Fed is to lower the credit level.

Greed threatens sustainable growth in the long run.

As the credit cycle has been expanded and the market liquidity is seriously insufficient, the Fed does not need to raise interest rates substantially.

For insurance, interest rates may rise to 1%, which is enough to predict that the curve will flatten and rise in the long run.

Do not underestimate the magnitude of the drop in interest rates under this assumption.

The 5 - year (5y5y) forward interest rate can easily return to its original low level, while the 2 - year bond interest rate may drop to 150 basis points.

China should also be involved in the Fed's tightening policy.

This will be a golden opportunity for further devaluation of the US dollar.

Deutsche Bank's "official" stance is bullish and optimistic because they are touted by the cheerleaders, such as rrno and Bianco, whose real job is to appease the mood of the bullish customers, who want to hear what they want to hear and then "soft dollars" in deflower.

Therefore, Deutsche Bank is in the "real" idea and "official" idea, and hopes that the two aspects can be taken into account.

But it is certain that Deutsche's official view of China is not so.

On the official side, Deutsche Bank is optimistic about China's economic growth and believes that the renminbi is

The space is not big.

Meanwhile, Deutsche Bank "official" believes that the Fed has the ability to raise interest rates without depriving the economy and credit market of freedom.

Even if profits are no longer restricted, the outlook for the labour market is no longer dim. The Fed still wants to slow down the pace of credit.

When credit slows down, buybacks will slow down.

The extension of credit cycles usually means a sharp slowdown in the labour market.

It is undeniable that there are still many metrics that show that the business sector is relatively gratifying in terms of net capital value, but in comparison with the same period in the past, today's data are generally much less.

But according to the current situation, it is expected that by the middle of 2016, the situation of these enterprises will be restored to the previous level, otherwise the Federal Reserve will not spend much time to raise interest rates.

Therefore, the Fed's tightening policy may have achieved the perfect result.

But there are two options for investors: when the Fed achieves its goals when the rate rises little, buy bonds.

When the Fed needs to take more radical measures to achieve its goals, buy longer term bonds.

The factors that make the choice are more placed in the position of the curve in order to make it flatter rather than to consider making the curve steeper or leveling.

What needs to be reiterated is that only the rate of return on capital should be considered by investors.

Rather than the "spectacular Implosion" of many junk bond funds that have been headlines last week.

If the economic and financial conditions are strong enough to cope with the growth of 25 base points, they will not happen at all.