VituVingiSana wrote:hisah wrote:VituVingiSana wrote:The Fed's hike of 0.25% is a known known. It's about when not if. A 0.25% hike isn't devastating. In Kenya, we hike by 2% like it's nothing! We moved from 9% to 22% in months for 91 day T-Bills.
Very few will move their 'hot money' from Kenya to the US for a 0.25% increase in USD rates. The countries that will see a movement of significant funds are those with low rates e.g. Japan, UK, EU, etc...
Fed rate hike will blow the junk bond market fuse. Liquidity will disappear swiftly in the process. This is the bidless event I expect in 2016. Nobody will be willing to touch long end paper thus forcing short end yields to spike. In a liquidity vacuum all markets will likely deflate. But my view is since the cycle end will be a bond bubble burst, equities will benefit after the sizable panic selloff. Bond portfolio baskets will blow up for good paying cts on the dollar for those few lucky ones that don't get vapourized! A hike will hurt Bond Markets in some countries. If the interest rate rises from 2% to 2.25% that's a 12.5% change in yield.
In Kenya, 0.25% makes no difference to us when we have 2.5% movements are 'normal' ...!
The eagerly hyped Fed rate hike is pegged on several factors as clearly outlined in the chairs press conference after the Oct FOMC meeting this includes but not limited to global factors, inflation, employment statistics etc etc.
From the wazua knowledge base how will these factors determine the Fed rate hike and/or its impact;
1. The recent US co's earnings reports are majorly below the analysts expectations signifyings possible challenges in the US economy itself, thus effects on inflations and/or employments,
2. Abe's japan & Jinping's china being the largest bondholders in the US markets,wont the Fed not look at the possibility of the 2 (among others) reactions should the rate hike affect the bond market as @hisah puts it,
3. The rates comparability of US & KE cannot have the same impact as the economy sizes are 2 uncomparables hence there is still a high possibility of capital outflows should the FOMC largely vote to hike the rate,
My 2 cents