Dodging Dots and Bullets

Posted on Dec 15 2016 - 7:58am by Sharpe Trade

Yesterday afternoon, Chairperson Janet Yellen unleashed an unholy barrage upon bond markets.

No, not by raising the target rate a measly 25 BPS.  Seriously.  It’s 25 BPS.  Who gives a flying rip about 25 BPS?

No, instead Fed junkies and market participants poured over the statement and inflation expectations by looking to the ‘dots’

If you are new … no … I am not making that up.  In all seriousness.  Dots.  To explain this very briefly, each dot on the chart  below shows where participants in the meeting estimate the target FFR should be at the end of the year.  The Fed publishes these estimations in a chart with a ‘dot’ for each of the participants estimation for that periodicity.

The bond markets moved on news that the mean average of “the dots” moved slightly higher.  Or put another way, the average inflation expectations on the part of the Fed have increased slightly for 2017.

Per Business Insider

fed-dot-plot-as-of-december-fomc-inflation-hikes

The 2’s are in the process of being crushed, and the 30’s are staring at the lows of the month, and of the last year and a half.

2 Year Futures
March 2017 Contract

2-year-futures-zth2017

30 Year Futures
March 2017 Contract

30-year-futures-zbh2017

You will note, that the public Sharpe Income Project sold out of TLT and SHY over a month ago, and we have not looked back.  

Why?

It probably has something to do with the fact that I know what I am doing.

I’m your huckleberry

2 Comments so far. Feel free to join this conversation.

  1. mappy December 15, 2016 at 9:23 am - Reply

    I can personally predict price movements of stocks 4 years out. No sweat.

  2. mappy December 15, 2016 at 9:59 am - Reply

    Bought JNUG $4.88. Holding overnight. Small position.

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