Blitzkrieg Bop! ECB to Activate First Line of Defense in Bond Market July 1 (Lagarde Calls For Monetary Maginot Line) WIRP Forecasts US Rate Hikes Until March 2023, Then Declining Rates

Confounded Interest ^ | 06/28/2022 | Anthony B. Sanders

[Browns Ultra Fan]

The ECB is planning on a Blitzkrieg Bop, monetary style.

When Lagarde talks about the first line of defense, all I can picture is The Maginot Line in France, a failed defensive line that was easily bypassed by the German Wehrmacht (army).

The European Central Bank will activate the bond-purchasing firepower it’s earmarked as a first line of defense against a possible debt-market crisis on Friday, according to President Christine Lagarde.

Applying “flexibility” to how reinvestments from the ECB’s 1.7 trillion-euro ($1.8 trillion) pandemic bond-buying portfolio are allocated is aimed at curbing unwarranted turmoil in government bonds as interest rates are lifted from record lows to curb unprecedented inflation.

Net buying under a separate asset-purchase program is also set to end on Friday.

In other words, Euro-area inflation has exploded in 2021, just like the USA.

But the US also has an inflation problem caused in part by Covid and the government’s reaction to Covid: economic shutdown and massive Federal monetary and fiscal stimulus. The stimulus is still in play.

The bond market is already anticipating an about-face by The Federal Reserve (implied overnight rate peaking at the March 2023 FOMC meeting, then receding.

Again, nothing has been the same since the Covid outbreak of 2020 and Fed monetary blitz. Here is the US Dollar Swaps curve before Covid (yellow line) and today’s Fed-enhanced curve (green).

Mortgage rates in the US have climbed to 6% then backed-off slightly. The good ole Back-off Boogaloo as The Fed attempts to unwind its monetary stimulypto.

The French Maginot Line, easily bypassed by German tanks. The Federal Reserve is the US’s Maginot Line. The Yellenot Line??

[Browns Ultra Fan]

This will never end.

[EEGator]

Are they saying 10 straight months of increases?

[Sirius Lee]

Of course it will end. And it will be ugly.

[Worldtraveler once upon a time]

It is interesting that war imagery is being spewed by Lagarde, as by others. The war is against reality, because the populace is being primed to cheer on an unwinnable war, such that they cannot say they were against this folly.

Lagarde, like Yellen and others, has been a fixture throughout the growing debacle. They are among those who continue to prop up a higher and ever more dangerous house of economic cards, but will be the first to say that someone else was at fault when the whole crashes. Such is the nature of modern, Leftist politics.