Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

A Major Policy-Error? The Fixed Income Markets Think So

Case for Lower Fed Policy Accommodation Becomes More Compelling, but Bond Investors Still Disagree

US Economy Enters H2 Robustly, but Fed's Outlook Being Increasingly Questioned by Bond Investors

US Growth Held Back by Supply Constraints, but US Treasury Investors Predict Slower Times Ahead

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Cross Asset Strategy

Despite the prospect of a higher federal funds rate in 2022, the latest Federal Open Market Committee (FOMC) policy statement has been viewed positively by financial markets due to the lack of a specific date to commence tapering asset purchases. The decision to taper will not immediately shift policy settings to neutral, and Chair Powell will be keen to emphasize this point, although much depends on the timing of the first increase in the federal funds rate.
The path of US Treasury yields in 2021 has largely confounded expectations, but recent history suggests that such outcomes are possible due to the behaviour of the term premium in the light of heavy buying by central banks. Aggressive measures by the Fed to keep the corporate bond market open has reduced loan demand in the banking system, thereby forcing banks to buy more Treasury bonds as part of bank credit.
According to the Fed, US households have  been net direct buyers of equities, while net indirect purchases via mutual funds have been negative since 2016. Meanwhile, despite ever-declining expected returns, households' indirect purchases of bonds via mutual funds have been extremely strong since March 2020 when the Fed undertook aggressive easing measures to prevent a global tightening of financial conditions.
While there is uncertainty about the outlook for the US and China, the recovery in the global economy suggests US Treasury yields should be higher than current levels. While bond investors embrace a pessimistic long-term outlook for the US economy, bond bears are basing their assessment on inflation having mean-reverting properties, an outcome that does not stand-up to statistical scrutiny.

Despite the prospect of a higher federal funds rate in 2022, the latest Federal Open Market Committee (FOMC) policy statement has been viewed positively by financial markets due to the lack of a specific date to commence tapering asset purchases. The decision to taper will not immediately shift policy settings to neutral, and Chair Powell will be keen to emphasize this point, although much depends on the timing of the first increase in the federal funds rate.
The path of US Treasury yields in 2021 has largely confounded expectations, but recent history suggests that such outcomes are possible due to the behaviour of the term premium in the light of heavy buying by central banks. Aggressive measures by the Fed to keep the corporate bond market open has reduced loan demand in the banking system, thereby forcing banks to buy more Treasury bonds as part of bank credit.
According to the Fed, US households have  been net direct buyers of equities, while net indirect purchases via mutual funds have been negative since 2016. Meanwhile, despite ever-declining expected returns, households' indirect purchases of bonds via mutual funds have been extremely strong since March 2020 when the Fed undertook aggressive easing measures to prevent a global tightening of financial conditions.
While there is uncertainty about the outlook for the US and China, the recovery in the global economy suggests US Treasury yields should be higher than current levels. While bond investors embrace a pessimistic long-term outlook for the US economy, bond bears are basing their assessment on inflation having mean-reverting properties, an outcome that does not stand-up to statistical scrutiny.

US Treasuries Defy Conventional Wisdom Due to Powerful Buying Forces