Marco Castelnuovo

Fixed income PM. Powerlifter.

[Marco Castelnuovo @MarcoCastel]

"Uncertainty is an uncomfortable position. But certainty is an absurd one." – Voltaire

[Marco Castelnuovo @MarcoCastel]

@darioperkins Well, at least we (europeans) have "framework guidance"...

[Marco Castelnuovo @MarcoCastel]

It would be fun to hike today

[Marco Castelnuovo @MarcoCastel]

@DannyDayan5 Trading sardines

[Dario Perkins @darioperkins]

I mean, they were all pretty dumb:
2022: arguments about "technical" recessions
2023: misreading the inverted yield curve
2024: misreading the labour market
2025: the whole stupid "detox" narrative

[Marco Castelnuovo @MarcoCastel]

@ClausVistesen Just to troll the "it's a policy error" people...

[Excess Returns @excessreturnpod]

The One Lesson: Our Favorite All-Time Answers

“Matt Levine, who’s such a great writer on Bloomberg’s Money Stuff, said that financial literacy should be boiled down to one question that people should understand. That question, he wrote, is: ‘If somebody comes to you and offers you an investment that has a 20% return with virtually no risk, what should you do?’”

“A) Jump on it, because it’s going to be gone in a minute if somebody else is going to do it. B) Research it, and if it is as presented, do it. Or C) Assume the guy is either lying or doesn’t understand the situation, save yourself the time, and walk away.”

Victor Haghani on why the answer to that question encapsulates the one lesson he would teach the average investor.

[Jorge Adrian @JorgeCalderonMx]

The great thing about yield curves is that the front-end shows the perception of market participants’ regarding the level of knowledge that the central bank has regarding its mandate(s) and its willing to act, or not, accordingly, while the longer tenors shows the perception of confidence of market participants regarding fiscal discipline and the ability to deliver growth and manage deficits.

The degree of the slope shows the level of trust between those hired to perform a highly specialized duty and those coming from popular election.

[Dario Perkins @darioperkins]

Yes this admin is all about free markets. Impose tariffs, jawbone stocks, piss about in FX, manipulate the oil price, fluff up crypto, insider trade at every opportunity, bully companies, and threaten caps on interest rates and prices...

[Steve Hou @stevehou]

💯"Forward guidance" is widely misunderstood by the financial press and community broadly. As a policy, it is fundamentally about policy pre-commitment. It doesn't mean "communicating/forecasting (contingent) monetary policies".

FG was invented to deal with the economic problem of "non-credible commitment". After the GFC, the global economy was sagged by weak aggregate demand, debt overhang and the "paradox of thrift". The Fed faced a non-credibility problem that despite its forecast of easy policies, (the Fed worried that) the market worried the Fed would tighten as soon as the economy showed any signs of improvement.

The Fed wanted to signal its commitment to overly easy ZIRP policy even if growth/inflation seemingly returned in order to give economy/market confidence about its policy commitment to fight the liquidity trap caused by the "zero lower bound".

It was never clear that this policy instrument worked or was needed but in any event it is clearly no longer the world we live in now. So now getting rid of FG, which had come to seriously constrain the Fed's policy flexibility, is timely.

However, I don't expect that we'll get less policy forecasts or signals from the Fed. The Fed Chair and governors will still likely be out there talking to the press and market participants about their views of the economy and the appropriate policy stances.

[Marco Castelnuovo @MarcoCastel]

@VKMacro The most hawkish bits were the dot plot and the commitment to price stability
But the dot plot is outdated and price stability means the long end is under control
Bullish

[Tom Graff🔸 @tdgraff]

Think of the 10-30 slope as kind of your "Fed making a mistake" gauge.

If it is steepening rapidly, market is saying "Fed's going to create inflation."

Big flattener, market is worried about growth.

Rn might be more of #1 fading rather than #2.

[Nick Timiraos @NickTimiraos]

There's a difference between not telling markets your next move and not telling them how you make decisions at all.

Kevin Warsh, at his first meeting as Fed chair, did both.

Warsh got high marks for planting a flag on the Fed's 2% inflation target and for shearing the policy statement of jargon that had become a recitation of the obvious.

But he also stretched his objection to forward guidance into something broader, using it to sidestep questions about how the committee reasons toward a decision.

"It matters to have some sense of how this committee is thinking about how it goes about conducting this business," said JPMorgan's Michael Feroli.

[Marco Castelnuovo @MarcoCastel]

@darioperkins Don't think this is about volatility, but about jump risk.

IF he really thinks what he said

[Marco Castelnuovo @MarcoCastel]

@darioperkins Demand volatility > supply volatility
Adios

[Dario Perkins @darioperkins]

After a decade+ of failing to forecast the price of bonds from "supply", are we really gonna play the same game with equities? 🤣

[Marco Castelnuovo @MarcoCastel]

@TheStalwart Trickle-down to Iran

[Marco Castelnuovo @MarcoCastel]

@AndreasSteno Very good, positive impact on growth...

[Frederik Ducrozet @fwred]

ECB sources vs. counter-sources game is up to another level.
*ECB GOVERNORS EYE JULY PAUSE AFTER FIRST HIKE
*ECB OFFICIALS SEE NEXT RATE HIKE POSSIBLE AS SOON AS JULY

[Dow @mark_dow]

QE perception QE reality

[Dario Perkins @darioperkins]

This was Bernanke, the godfather of QE/"helicopter Ben", admitting that the size of the balance sheet doesn't matter. Yet most of you guys still believe in the QE/QT fairy... he really did a number on you.