Fed minus 2-year yield flashing AMBER
***FYI, I am on mandatory leave next week with no access to email or systems. Best of luck in these choppy markets***
Bit more "Harping" on the 2000-2001 cycle before I go.
On 1st Jan 2001 we saw the 2-year yield 160 bp's below the Fed Funds rate and the Fed cut 50 bp's on 03 Jan (the first of 5 such cuts)
That spread is presently at 88 bp's (level then that was seen just 1 month earlier in that period on 4 Dec 2000)
In 2007 it reached minus 140 bp's on 10 Sept and the Fed cut 50 bp's on Sept 18. It was at minus 88 bp's on 14 August 2007
In 1989 on 5 July this spread was 166 bp's and the following day the Fed cut by 3/8% (They had already initially cut 1/8% on 05 June when it hit minus 123 bp's
Bottom line any signs of this spread heading into the minus 120-minus 160 bp range (2 -year yield at 4.3-3.9%) suggests we could be in a 1 month or less timeframe for a cut.
Could make it somewhat tricky here for the Fed given the large July (31) Sept (18) gap in meetings
IF we were to enter that gap in the next few weeks it should completely solidify Sept and possible even point a glimmer of light (low probability) to July
