U.S. market interest rates have jumped again.

U.S. market interest rates have jumped again. Treasury buybacks (which are not big enough), Treasury supply cuts (which are likely to increase again starting in the third quarter... especially long-term government bonds), and the Fed's quantitative tightening... We've been pressing on the 10-year Treasury rate to defend against interest rates popping up... Expectations that the pace of the Fed's key rate cut would slow down... Interest rates rallied strongly around two-year Treasuries. The two-year Treasury rate hit 4.95% in no time, approaching 5% again.

Changes are also detected in the Fed's probability of lowering its benchmark interest rate from the market... The possibility of a September rate cut that the market was expecting was over 70% not long ago. Now it's around 51%. It's a 51:49 fight. And the probability of a further December rate cut has also become timid. Currently, we're looking at a freeze rather than an additional December cut. The possibility of one cut within this year is higher. As I've been saying, isn't it going to be like 2016… I remember when I raised it four times and then barely raised it once at the end of December.


I think H4L means that, in the end, interest rates are higher than they were in the past, they're going to outlast market expectations. The key word here is "expectation." That strong will to cut interest rates... And it allows you to overcome any pain, and if you cut it, it's going to be very strong. And the liquidity that's going to come out with that kind of liquidity crunch, that's going to have to be a recession-level shock to produce that kind of liquidity flood. And that shock can be created by the continuation of a high-interest rate trend and the accumulation of that period of time. It's actually been the case in the past, but it's been the strong "greed" that the market creates… In the end, the willingness to cut interest rates makes it endure the pain that it creates as the high interest rate trend continues. When the pain becomes a reality, so it becomes harder to bear, so we will cut interest rates… If you smile happily in the midst of high interest rates in anticipation of a strong rate cut in the future, that is, a lottery, wouldn't the rate cut be delayed further.

I've been saying for quite some time that it's a smaller rate cut than the market expected. At least in the past year and this year, that's happening. According to market expectations, we should have cut 200 basis points from September last year to the end of this year. Even if that was the case, there were six to seven expectations for another interest rate cut earlier this year… And the market reaction that that expectation produces, the solid U.S. economy changes the direction of actual interest rates. Everything is relative. We're not cutting it because we're raising interest rates, but we're going to cut rates only when inflation cools down. Even if we raise it, we're going to be so solid in anticipation of a cut that if inflation doesn't cool down... It's not easy to go around the cut.

So I'm going to talk about saving. The excess savings in the U.S. are enormous. The excess savings of the working class seem to have obviously been exhausted. But their consumption... As you wake up, that savings can go to the wealthy and build up. High interest rates are a huge blessing for the wealthy. The MMF in the US, which is said to be worth 6 trillion dollars, shows this.... If you give 5% interest per year in $6 trillion MMF, the interest will reach $300 billion. Suppose you invest with this money...(Of course, $6 trillion MMF isn't all stock money) The whole asset market can heat up. Especially, it's real estate that I'm more interested in than stocks. It can affect the housing market in the U.S. and... In response, Goolsbee, the head of the Fed doves, also mentioned that the U.S. housing market is a wild card.

Then the asset market is hot, and the consumption on that basis supports the U.S. economy to a certain degree. On the other side of polarization, the working-class economy gets cold. And debt builds up, and the pain increases due to continued high interest rates. Then we have to lower interest rates. If we can get more housing prices to jump by a large margin when we cut interest rates... Would a rate cut be right? The Fed minutes and the Bank of Korea's Monetary Policy Committee on the previous day also asked about easing the financial environment. In the era of polarization, the impact of high interest rates also gives a huge blessing to someone and a frustration to someone. I think the Fed's worries are bound to grow.

Polarization doesn't just happen in the U.S. It happens in the U.S. and other countries. If the U.S. economy is relatively strong... And it's going to keep interest rates high. On the other side, it's a country that doesn't have as much economic power as the United States… It's going to be affected by U.S. interest rates... In spite of the weak economic power, you have to get high interest rates from the United States. In the past, the Fed would lower the benchmark interest rate in the name of international development, worrying about slowing growth in other countries… But now, the nose of the U.S. is also a stone statue.

But with the American working class... Shouldn't we cut interest rates as countries other than the United States are struggling… This is the justification for those who insist on lowering interest rates... And the more interest rates continue, the stronger they build up, but... The more you build up those justifications... As the willingness to cut interest rates grows, the market smiles. Seeing the tight inflation that such a smiling market creates, the Fed pushes back on cutting interest rates...

How long will this frame last? If it lasts for a long time, it will be possible for inflation to become entrenched due to prolonged inflation. This will further strengthen the rhetoric of H4L. If you're afraid of this unfolding… The Fed will try to change something, just like Japan tolerating a recent rise in interest rates... This could act as a new risk to the market, breaking the current equilibrium and finding another one... The market atmosphere used to get confused when we found a new frame.

Yes.. with the market expecting a rate cut... YEONJUN can't live up to that expectation... But