So says Jeffries. My own view is that oil has likely peaked for the cycle already as China and India extract Russian oil and sanctions steer clear of energy. If you subscribe to it, my base case of the five shocks of European war and energy, Chinese property and OMICRON, and US rates driving global recession commencing H2, 2022 makes bonds attractive at current levels.
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Quantitative tightening is now officially on the agenda, as reflected in the release of the Fed minutes on Wednesday and pending FedVice Chair Lael Brainard’s hawkish speech on Tuesday where she endorsed balance sheet contraction and stated that the “paramount” objective was to bring inflation down. This is in stark contrast to her doveish commentary for most of last year where her prime focus was “inclusive” employment. As a result, a 50bp hike in the federal funds rate now looks a done deal in May while the quanto tightening details imply a reduction in the Fed balance sheet by an annualised US$1.14tn from the current US$8.94tn.
