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maybe we can perceive the issue this way,
Fed board members want to keep their jobs, so they do
not want to do something too drastic like what they did in
1987 and before. Thus they just react :)
Before 1988, there is no such lead of 3 months behaviour.
-Lawrence Chan
----- Original Message -----
From: Andrew <warlord@xxxxxxxxxxxxxxxxxxxx>
> At 09:01 AM 1/3/00 -0500, Lawrence Chan wrote:
> >Anyone has all the historical rate hike data?
> >I got not much, about past 20 years.
> >Since the crash of 1987 ... The Fed always follow what
> >the bond market do with a discount - with a lead of at least
> >3 months.
> >i.e. if the bond sell to a new lower level, Fed will rate hike.
> >Fed wait to see if the bond "stay" at a level before adjusting
> >their rate to the new level!
>
> 1. Market perceives Fed will hike, bond dives.
> 2. Fed perceives Market going for higher long term rates, Fed follows.
>
> Offhand, I think it is impossible to discern between the two hypothesis??
> At least using just price data alone. (Even with my lower "standards"
> of rigour, I take natural experiments as establishing causal relationship)
> Any challenge to this position much appreciated.
>
> I remember reading a wire a couple of years ago. It went something like
this.
> The S&P floor traders said they saw the dollar rallying and bought the
S&Ps.
> A couple of lines down ...
> The fx market said they saw the S&P rallying and they bought the dollar.
> Was a good laugh. Unfortunately, I did have the sense to print out the
article.
>
> How about bonds tanking and commodities rallying as the business cycle
> topping out?
>
> B4 I forget.
> Happy New Year all.
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