Don’t Be Surprised By Clear Taper Talk From Bernanke For Reasons Other Than Jobs Numbers

On the eve of the Federal Reserve Chairman Ben Bernanke presiding his last Federal Open Market Committee meeting, which wraps up this Wednesday with a press conference, a growing number of hedge fund traders who operate along the yield curve are anticipating Bernanke to announce the beginning of the end of quantitative easing.

What is behind the tapering talk? It could be about more than just a positive jobs number.

While a robust jobs market was a prerequisite for a taper, two other behind the scenes factors could come into play. Bernanke has been praised but also widely criticized for the unconventional bond purchasing program. Many economists and professional investors have said the Fed does not have an a workable exit program for quantitative easing and the program is suppressing the free markets role in price discovery. To this end, Bernanke announcing the end of the program as he leaves office is expected to place in the history books the fact Bernanke started and began the exit process, something he is said to want tied to his name.

The second reason to taper in December is more practical. With equity markets dropping at the mere whiff of tapering talk, announcing the end of the program during the holiday season – a traditionally bullish period of time for stocks with many professional traders not as active – could be the ultimate period of time to taper as it could lesson potential negative market impact.

If the Fed does not begin the actual taper in December, hedge fund traders expect some definitive indication that the program will begin to be announced at the press conference this Wednesday.

What will the exit of the Fed from the interest rate market do to interest rates? While many hedge fund traders say the yield of the ten year note could quickly rise to 4.75%, Feuerstein expects the yield to top out at 3.60%.

DISCLOSURE: These are the opinions of the author and may not have considered all risk factors. Nothing on this web site should be construed as an individual recommendation, talk to your independent advisor. The author and Opalesque may have relationships with those people they cover in the publication. Mr. Melin provides a full disclosure of his business relationships to regulators and certain eligible participants who engage him in consulting projects. Managed futures investing involves risk and there are no guarantees of safety or future performance being implied. Managed futures can be a risky investment. This web site and its content is subject to the terms of the web site. Risk Disclosure and terms of web site are available here: Performance information received on this site is provided by third parties and deemed reliable but there is no guarantee relative to same. Performance reporting sources and quality assurance techniques may include, but are not limited to: disclosure document, CTA self reporting, brokerage firm reporting, consultant reporting, spot checking other reporting databases; nonetheless no guarantee of accuracy or implication performance verification or auditing is being made by the publishers. The CTA Database is a project separately managed from

Leave a Reply