'All these tiny ticking time bombs' are threatening the market, and the coming week could deliver a big shock, trading legend Art Cashin says
Wall Street legend Art Cashin is cautioning markets to keep a close eye on the the Federal Reserve's quantitative tightening and a possible reversal from the Bank of Japan.
"The Fed has stopped being an aggressive buyer of US Treasuries. And if the Japanese people stop being an aggressive buyer, that's going to force rates and yields higher too," Cashin, UBS' director of floor operations,While markets are focused on how much higher benchmark rates will go, the Fed has been slowly shrinking its balance sheet"behind the scenes," he said.
"I think we've got all these tiny ticking time bombs to keep an eye on. So yes, I agree with you, people aren't watching QT as closely as they should," Cashin added.of taking money out of the economy has helped push up bond yields. is at its highest since 2006, and the 10-year yield topped 4% last year before pulling back a bit earlier this year.
Meanwhile, the Bank of Japan in the next week may compound the issue. An outlier among most central banks, Japan has maintained a loose monetary policy, allowing yen to be borrowed cheaply and plowed into purchases of Treasurys., most likely to be the bank's newest governor. His hawkish attitude could indicate an end to Japan's easy-money stance, which could lower demand for Treasurys and send US yields higher.
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