@Brad_Setser @TheStalwart @Birdyword One thing I can assure you of; there is no fiscal/sovereign fear in Japan. We would see CDS react if there was.
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Eric Hickman
1K posts
Eric Hickman
@EricWHickman
25-year US Treasury Manager & Strategist | 79% accuracy on calls for the last 3 years | Founder, Lantern Capital
Denver, CO 가입일 Eylül 2010
185 팔로잉812 팔로워
@TheStalwart @Birdyword Puzzle is that nominal rate differentials at the 2, 5 and 10y horizons have shrunk a lot -- so there is an argument that the yen is weaker than implied by at least some of the rate fundamentals
(it also tends to sell off on oil risk)
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I know Japan has its own idiosyncrasies. But what's the tweet-length explanation of why various Asian currencies (particularly KRW) have been so weak, despite the extraordinary export boom. I assume @Brad_Setser and @Birdyword know.
Joe Weisenthal@TheStalwart
*YEN SLIDES TO WEAKEST LEVEL VERSUS DOLLAR SINCE 1986
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@vtg2 But he's not defying President Trump. Trump can't have inflation either.
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New Federal Reserve Chair Kevin Warsh got a big boost for his job security from the Supreme Court at a crucial moment, with investors increasingly betting that he’ll defy President Donald Trump and raise interest rates this year.
politico.com/news/2026/06/2…
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@SquawkStreet @elerianm The Fed won't raise, but they need to jawbone intensely. They are 5+ cuts too loose.
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"I think the market is too hawkish - I would be shocked if we get a rate hike in July and I would be surprised if we get a rate hike this year," says Allianz’s @elerianm
cnbc.com/video/2026/06/…
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@robin_j_brooks Japan's 5year CDS is doing nothing and low. There is no fiscal distress in Japan.
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Here's the thing about the Yen. Markets are obviously expecting another round of intervention, which is what's preventing the Yen from falling more steeply. So just imagine where the Yen would be without this. $/JPY would be 170 or maybe even higher...
robinjbrooks.substack.com/p/fiscal-distr…
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@Markzandi No I know. It is just that the aggregate numbers look good. The economy is overstimulated in my opinion.
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Economic data is very STRONG right now; the whole reason why inflation is a problem. It has gotten better month after month all year in a very clear way; LDEI, surprise index, coincident index. Reaching for negative things to keep your narrative alive is the worst kind of economics. It confuses the public that trust you.
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The raft of economic data released last week isn’t sending off red flares, but it is sending off yellow ones. No red flares because real #GDP is still growing at a 2% pace, with AI and corporate tax cuts powering business investment. But yellow flares because consumers struggle to maintain their spending. Adding to the concern is the fall in real disposable income — the fodder for future spending — which rarely happens outside recessions. And the saving rate is seldom lower. With consumers accounting for over two-thirds of GDP, and business investment less than one-seventh, those yellow flares are getting brighter.
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Most people talk about Stock prices when they talk about Seasonality, but Volatility and Credit Spreads also follow seasonal patterns...
Off-Topic #ChartStorm on Seasonality: chartstorm.info/p/off-topic-ch…
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@cha12771 Sorry, I should've said why. I think my cycle within a cycle theory is what's going on and eventually rates will rise enough to slow the economy again, and rates will fall the new lows. lanterncapital.com/the-6-deficit-…
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The Fed needs to raise rates and/or convince everyone they will urgently.
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@Callum_Thomas The cycle comes back every 5-ish years in some form, recession or soft landing. The 2-year is a more symmetrical way to see the cycle.
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@rev_cap Inflation is a big problem right now. I don't understand Barkin and Williams downplaying it.
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The early signs of inflation easing: I made it up
Every Fed speaker every month since 2021
First Squawk@FirstSquawk
FED'S BARKIN: INFLATION REMAINS TOO HIGH, THOUGH THERE ARE EARLY SIGNS THAT PRICE PRESSURES COULD EASE.
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@SantiagoAuFund The dollar is just interest rate differentials for the last 5 years, anything more complicated than this is unnecessary.
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Today we are releasing a report called The Band.
At 80 pages, it is our most complete statement on how the Dollar system actually functions, and why so many forecasters continually get its future wrong.
It can be found at the link below.
research.santiagocapital.com
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@robin_j_brooks No, I’m not. The Yen narrative is borne of ideology, not facts.
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@robin_j_brooks Japan has the lowest debt service to GDP of the G-7. 5yr CDS for Japan is lower than the US @ 28bps. The Yen is falling because interest rate differentials are falling between US and Japan. The Yen should be falling. The Japan story right now is reacceleration.
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The Yen has just fallen below its 2024 low versus the Dollar. Now imagine where $/JPY would be if there weren't the constant threat of intervention. That threat is the only reason $/JPY isn't 170 or higher. Japan's massive debt is a disaster for the Yen...
robinjbrooks.substack.com/p/what-should-…
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@robin_j_brooks Because oil never had anything to do with it. The dots rose about the same amount the market did between the two meetings (~48bps) and rates rose because the Taylor Rule rose about 50 basis points. The Fed has a serious inflation problem.
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How come the dots shifted in such a hawkish direction between March and June, when March was the peak of the oil price panic, while there was an Iran peace deal just ahead of the June FOMC? I'll talk about this on my live stream this morning at 9 am (ET).
open.substack.com/live-stream/25…
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@MichaelRStrain I agree with you. But they need to jawbone now to prevent them from having to do it.
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Underlying inflation seems to be accelerating.
The bond market seems to think the odds of a rate hike in September are around two-thirds, and the odds of a hike by the end of the year are around four-fifths.
I think the Fed *should* hike before the end of the year. But I don't think the Fed *will* hike before the end of the year.
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@robin_j_brooks What? Its really obvious the Fed needs to hike to Trump and to Warsh. They can't have inflation either.
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I'm doing my usual 9 am (ET) live stream tomorrow. I'll talk about a conspiracy theory going around about the Fed, which holds that a group of people on the FOMC showed hawkish dots to box Warsh into hiking, hoping to set him up for conflict with Trump...
open.substack.com/live-stream/25…
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@EricWHickman Raise a few times now or they will need to with abandon layer.
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According to these variations of the Taylor Rule, the minimum the Fed should hike is 100bp...
Atlanta Fed@AtlantaFed
June 25: We’ve updated our Taylor Rule Utility data by incorporating #BEAdata in addition to updated nowcasts from the @ClevelandFed and Atlanta Fed: atlfed.org/4w2m9QK.
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@BobEUnlimited No, the Fed has an emergency. Williams is the most dovish one you'll hear from is my guess.
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Don't spend a ton of time reading Fed commentary, but this seems roughly in line with where I'd expect the committee to be at right now - hopeful its in the past - and not in line with hikes needed now or anytime soon...
x.com/SpecialSitsNew…
Special Situations 🌐 Research Newsletter (Jay)@SpecialSitsNews
NY Fed on inflation and rates John Williams: "In coming quarters, however, I expect inflation readings to edge down" for several reasons: • First, tariff effects "appear to have mostly played out." • Second, a base case is that Hormuz related supply disruptions "are resolved relatively soon." • Third, housing inflation should continue to slow. • Fourth, there's no evidence of labor-market driven price pressures. Additional Points: 1. Macroeconomic Outlook & Resilience a. Absorbing Shocks: Despite unpredictable global risks—specifically ongoing economic disruptions from the Middle East conflict—the U.S. economy has remained highly resilient. b. Consumer & Business Health: While households face elevated fuel and energy-input costs, consumer spending and business investments remain robust, heavily accelerated by the ongoing AI investment boom. c. Anchored Expectations: Inflation expectations remain well-anchored mid-term. One-year-ahead inflation expectations ticked up modestly through May, but three- and five-year outlooks are unchanged. 2. Monetary Policy Stance a. The Target Range: The FOMC recently maintained its target federal funds rate at 3-1/2% to 3-3/4% to continue steering inflation toward its long-run 2% goal. b. Two-Sided Risks: Williams highlights that substantial macro risks remain. The AI boom could push prices up faster than expected, while Middle Eastern supply chain interruptions threaten global growth.
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