Why the next Fed meeting could get spicy
If you're expecting another kumbaya moment from the Federal Reserve, temper that. On Bloomberg Television, Rebecca Patterson - who previously was Bridgewater Associates LP's chief investment strategist and today holds a senior fellowship with the Council on Foreign Relations - said "there's a chance at this next Fed meeting, we will see some dissents." She sees policymakers dividing between those open to pausing in October and those arguing that inflation is still sticky despite a better-than-expected PCE reading, with the economy still broadly strong.
That backdrop follows last month's Federal Open Market Committee move to deliver its first rate hike since 2023 with a united front, a step that former Fed vice chair Richard Clarida said sent a "very firm signal" on fighting inflation. The Fed gathers Oct. 27-28, one week before the Nov. 3 election. Patterson pushed back on the idea politics sway policy, saying if it were perceived that way "their credibility would be done," with 10-year Treasury yields at 6% or 7%.
The jobs miss and how markets took it
Patterson's remarks came after a softer-than-expected September payrolls report. She characterized the month as adding 29,000 jobs versus roughly 88,000 to 90,000 expected. Even so, she called the labor market "low-hire, low-fire" and fundamentally solid, with jobless claims near cycle lows, and noted that a 29,000 gain is still growth when the breakeven is near zero.
Despite the miss - which fell short of all estimates in a Bloomberg economist survey - stocks rallied on hopes the Fed holds in October. Treasuries were choppy, with the 10-year yield above 5.24%.
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Bonds, budgets, and the Fragile Four
Patterson flagged a lingering risk: choppy sovereign bond markets. She pointed to two forces at work - worsening fiscal positions in several countries, and the fact that, as central banks pull back, short-term leveraged participants such as hedge funds are filling the gap, amplifying volatility.
Europe offered a real-time tell. The spread of French 10-year bonds versus comparable German bunds widened to its highest level since 2011. Patterson grouped the US, UK, Japan and France as the "Fragile Four" given large and rising debts, voters that penalize austerity and leaders who answer with additional spending. In her view, France is the most vulnerable as it lacks the ability to issue its own currency and has endured significant political upheaval.
What this could mean for your money
Between possible Fed dissents, a softer jobs backdrop, and jumpy government bond markets, rates remain the main character. Patterson previously worked at JPMorgan Chase & Co., and later moved to Bridgewater - among the world's largest hedge funds - and her comments highlight that volatile sovereign yields are still a potential pressure point for everything from mortgages to stock valuations.
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