Chip wreck

Oops, it happened again. US crude tanked more than 11% yesterday after the US suddenly stopped its attacks on Iran, and US President Donald Trump said there was "a good chance" of reaching a deal with Iran. Oil extends losses this morning, with US crude trading near $82.5pb and Brent crude near $85pb following a more than 13% pullback yesterday. Fun fact: Iran denies that talks are taking place. So there is an even better chance that Trump's statement is just another empty promise, much like the umpteenth previous pledges to end the war and reopen the Strait of Hormuz.

Whatever it is, the retreat in oil prices is pulling global yields lower – making me think that this is just another verbal intervention from Trump to stop the spike in US yields. Indeed, the US 10-year yield is down from its previous 4.70% peak, while the US 2-year yield – which best captures Federal Reserve (Fed) rate expectations – has pulled back to 4.30% as the Fed starts its two-day policy meeting today.

A partially priced Fed hike?

This is the second FOMC meeting under the new Chair, Kevin Warsh. In his first meeting, Warsh refused to add a dot to the dot plot and refused to make predictions. This time, some expect him to deliver a partially priced rate hike to reinforce the idea that the Fed will no longer rely on forward guidance but instead strengthen its credibility. Given the extreme uncertainty in the geopolitical landscape, which has major implications for the macroeconomic outlook, Warsh's strategy of "stopping trying to guess" sounds about right.