Interesting. There's so much debate about whether this comment itself were
actually dovish or hawkish. What's your take on what the Fed did.
Well there's something for everyone and I think you've covered it pretty well.
There is a big gap from so the next meeting. And inside that gap you've got Jackson Hole for example which is when some of the
big guys set a set piece moves can happen. Recent Jackson holes haven't really given us too much of a surprise for the markets.
At least that's one possibility. I really don't know by the way. But you know every data release more matter than the Fed is not
well served by the market front running them too much. And then we have to think about that very carefully because the forwards
which by definition move in advance have already priced out the peak for yields. And that would and that was around the last
FOMC in the middle of June. So that's done. Others will be calling the inflation peak as well. That's the
subjective probabilities around recession. All this is happening now. The thing is if the market moves too fast and too quick to
price it all in. Then you get the loosening of financial conditions. And that's difficult to calibrate of course. But
it's going on in the background. So. So look it's it's a long period of time until the next FOMC.
I reckon that they probably a lot closer to the peak than people think. I would take issue with the idea that they hike
aggressively at every meeting through to the end of the year. To me
the markets are set for the Fed overshooting still. Don't forget if neutrality is a two to two and a half and the dot plot
Scotland gains of three and five eighths that's a fairly big overshoot. And to me if it were if it was so obvious that you
have to go 100 hundred 150 or so beyond neutral to come back to neutral then just don't do it. Meet in the middle. And that's
where that's where the debate is right now. Do you think then they'll be able to. I think the iteration of
that right now Stephen is to 100 basis points high this year price and then it's 60 basis points of cuts next year. What is
the market correcting pricing in lower rates next year. Yeah. That's before I answer you directly David. And that's
that's the difficult thing to price in so much tightening followed by easing the elegant the elegant outcome will be
presumably to do less. And any central banker who's who's candid enough to admit it would say would say that if it's so obvious
we're going to make a policy mistake let's not make that mistake. So. So the problem for the market is you need to be
sure you're at the peak before you can really price in the easing. And that's why the curve isn't steepening aggressively.
In fact the coupon curve is inverted as you can see. And that's also why the the dollar view might still be in flux. Right. So
the forwards have moved first. Now we're waiting for the curve for the curve to steep when you need to be sure you're at the
top. And we're we're not quite there yet. And then maybe the dollar call has all come subsequently. I don't know. It's not my
call to make. But in terms in terms of the big the big macro calls that drive asset markets
those are probably the two or three that matter. You mentioned that maybe we are going into that peak rate
scenario. Is there still value in a long and I know you mentioned that maybe a month ago or is that triggering a bit too
rich now. Yeah. The 30 year is okay around 3 percent. I think people will
be happy to own long bonds at 3 percent. Don't forget there's a business there's a product. So there's a there's a complementing
other asset. So you can buy credit close to 5 percent. You can get high yield. Now with much more so. So investors can now look
to build a portfolio that's fairly robust and get close to 5 percent yield say and sell. So that's something that you
couldn't do a year ago which is which is new. As for the Ten's our forecast is 2.5 feet for year end. But it's
been there since March of this year. We haven't chased it up and then down again. So. So it said to me that the near-term rally
could start to get a bit stretched. And yes I'd rather the market didn't get too far ahead of itself. Otherwise we haven't
got any juice left in the yield. So. Yeah. Right. Well that takes us as a final question. We'll continue
the conversation in a bit. Enthusiasm dropping forward guidance. Do you think that was a good idea.
Well David don't forget they've they followed from others notably the ECB did it in a more formal fashion.
And here's the paradox. To me it's it's a bit of a paradox. It seems that bond volatility is often higher during the forward
guidance and maybe becomes less when you take it off. That seems to be
the wrong way round. But then that's the way markets seem to work because
whilst you've got the forward guidance on your and your giving indications about the forward points any change is going to be
really a big surprise. But once you got over with what you've got once you've got that Paul start surprise and let the markets
find neutrality and equilibrium and the market move the markets are doing that for the Fed. Then we can respond to all the
incoming data in real time. And that actually reduces the volatility. I mean it's counter intuitive but it seems to work.