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Kyle Bbad, the specious hedge fund manager who imposed himself through cautious bets against the US real estate market, Greece and Iceland, is now betting that US interest rates are going to increase. Will collapse to near zero next year, as the country enters into recession and the Federal Reserve pushed into crisis mode.
Investors expect the US central bank to cut interest rates when it meets later this month, which would be a preventative measure to avoid trade tensions and slower economic growth and ensure that inflation returns to its closure target. at 2%.
Interest rate futures indicate that traders believe that this will be the beginning of a longer rate reduction cycle, with the Fed being able to cut rates by a full percentage point, to 1.25-1.50% from here next year. But Mr. Bbad – founder and chief investment officer of Hayman Capital Management, based in Dallas – believes the forecasts are too lenient.
He is betting that the current economic slowdown in the US is turning into a recession by mid-2020, forcing the central bank to bring monetary policy back into its financial crisis – and to stay there for the future. predictable.
"As we all learned, once the economy has reached a zero rate, it's almost impossible to escape them," said the Financial Times hedge fund manager.
Focus on reducing interest rates by the Fed has become a hugely popular hedge fund business. According to data from the Commodity Futures Trading Commission, fund managers are now the "longest" on popular interest rate futures – in other words, they bet that rates will go down – since the beginning of 2008.
"The steady decline in US Treasury yields, despite a strong economy and a large deficit, suggests that the US could join the world of Japan and zero-yielding Europe in bonds in the coming years," he said. said Jan Loeys, senior strategist at JPMorgan. , wrote in a note to customers last week.
Bbad's concerns about the US economic outlook were prompted by the "inverted" yield curve, as the 10-year Treasury yield lagged that of three-month bills since the end of May. An inverted yield curve has always been a precursor to a recession, preceding each US slowdown since the end of the Second World War.
The US yield curve has slightly increased recently, after Fed Chairman Jay Powell hinted last week that a rate cut was indeed imminent at the end of the month. July. However, Bbad still expects the recession to collapse next year and the Federal Reserve follow the Bank of Japan's stock-taking and boost quantitative easing and even the purchase of cash. shares.
"In the long run, the United States is moving in the same direction," he said. "Growth will decline and real growth could be zero. We will probably never move away from zero rates. "
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