Wednesday, November 9, 2016

The 4 macro monetary conditions with curve steepening and flattening


The four macro monetary conditions

1 Dovish Fed during Improving Macro economic conditions
2 Hawkish Fed during Improving Macro economic conditions
3 Dovish Fed during Declining Macro economic conditions
4 Hawkish Fed during Declining Macro economic conditions


The four macro monetary conditions with steepening and flattening yield curve

STRONGER MACRO – STEEPENING YIELD CURVE
            1 DOVISH FED – BULL STEEPENING (bullish for everything)
                        Short term rates fall faster than long term rates
            2 HAWKISH FED – BEAR STEEPENING (renewed animal spirits)
                        Long term rates rise faster than short term rates

WEAKER MACRO – FLATTENING YIELD CURVE
            3 DOVISH FED – BULL FLATTENING (secular stagnation)
                        Long term rates fall faster than short term rates
            4 HAWKISH FED – BEAR FLATTENING (recession risk)
                        Short term rates rise faster than long term rates

No comments:

Post a Comment