Is Fed Still on Target to Taper in September?

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Sept. 6 (Bloomberg) – Pimco Executive VP Rich Clarida, RH O’Brien & Associates Managing Director John Brady and Bloomberg's Julie Hyman discuss the strategy for treasuries. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

There was some hope that the fed will stave off the tapering.

But bloomberg news -- and median of that survey found that they think that guess what, tapering is coming.

They said the treasury will see a reduction of 10 elion dollars.

There seems to be a continuing disconnect between the stock market and the bond market and the economists, between how the market is behaving, and what the economists think will happen.

They are trying to figure it out.

Let's go to rick , an economist from petco.

Where do you see this in the next 10 months.

I think that today's jobs report is an indication that the economy is stumbling along at two percent, but this is not about to achieve escape a loss of eight.

I think that the yield will be lower.

How much lower?

That will depend on the data.

This could be 40 or 50 basis points lower.

Let me go over to john brady, to get your sense of what is going on, and whether or not you are investing in treasuries right now with all of this uncertainty in the world.

The treasuries are off a little bit more value today than they were in january and february.

I think in the short term, the path of least relives -- reese -- least resistance -- there were large pools of global capital that are still yielding strong in many ways.

This is down 78 basis points.

Three percent treasuries are not extensive -- we talk about the rotation out of bonds and into equities, we may have seen some of this.

What are you hearing in terms of the process for this as we move closer?

The conventional wisdom is that if you see yields at a certain level, this will trigger another move.

We saw this earlier on in the year.

There was a rapid increase in those treasury yields, and we saw people moving over to stocks.

The thinking is that this market -- we will not see that kind of movement until we see the movement already.

This will feed upon itself.

And you say that there is no great rotation?

This is not in the data, and over time this is something you have to follow but this is not something we have seen yet.

This would be a variety of factors.

The great rotation was a time when monetary policy have high and rising inflation.

I think another important thing to remember is that there is a large pool of global capital that is wanting that in times of economic downturn.

In times of crisis and dislocation, the treasuries happen to work well.

We have been debating here on the set, exactly when the taper will happen and we have indications from the jobs report that maybe they will put this off and it won't happen in september.

The fed does not want to throw a curveball this late in the game.

This was not weak enough to postpone tapering.

I think that they will announce this at the september meetings.

How much?

10 billion is the right number but it could be 15. this has been an interesting phenomenon in the options market over the last few months.

The short end volatility has risen since the last minutes were released, when they discussed this new repossession facility.

For some investors, i think that the two-year volatility is a little bit rich compared to seven or 10 year volatility.

We are looking at strategies that kind of go in line with the fed continuing to taper.

Thanks to everyone.

Julie hyman and john brady.

Coming up, we are going to a macro free zone.

Forget jobs in syria, we are talking about stocks, specifically.

Keep it right here on "street smart." ?

This text has been automatically generated. It may not be 100% accurate.


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