Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Wednesday, February 04, 2015
The ECB Fears Deflation, But You Should Not / Interest-Rates / Eurozone Debt Crisis
By: Frank_Shostak
The European Central Bank (ECB) is planning to pump 1.1 trillion euros into the banking system to fend off price deflation and revive economic activity. The ECB president and his executive board are planning to spend 60 billion euros per month from March 2015 to September 2016.
Most experts hold that the ECB must start acting aggressively against the danger of deflation. The yearly rate of growth of the consumer price index (CPI) fell to minus 0.2 percent in December 2014 from 0.3 percent in November, and 0.8 percent in December 2013.
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Wednesday, February 04, 2015
The Swiss 10-Year Bond Illustrates Central Banks` Flawed Monetary Policy / Interest-Rates / Credit Crisis 2015
By: EconMatters
Negative 15 Basis Points
Switzerland`s 10-Year Bond Yield is now negative 15 basis points, yeah that`s right we don`t even have to bring up the notion of inflation and real rates of return, the actual 10 year bond for Switzerland is charging investors 15 basis points for the privilege of buying Swiss debt, and you thought CD rates were bad.
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Wednesday, February 04, 2015
This Is What Gold Does In A Currency War / Interest-Rates / Currency War
By: John_Rubino
Australia just fired a serious shot in the currency war by cutting its overnight lending rate to a record-low 2.25%.
With the aussie as a result tanking, local holders of bank accounts and cash are quite a bit poorer than they were at this time last year. But owners of gold are doing just fine. While the metal is falling again here in the US (which is at the moment trying to withdraw from the currency war), it’s up about 20% in the past three months in countries like Australia that are on the offensive.
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Tuesday, February 03, 2015
Central Banks Have Violated Fundamental Laws of Finance / Interest-Rates / Central Banks
By: EconMatters
Is Monetary Policy Too Complicated for Mainstream to Understand?
It is amazing how far Central Banks have been allowed to go with regard to policy tools and influence, and how extreme their policy measures have become since the financial crisis. No other form of governmental authority has been granted these types of unrestrained powers in any branch of government, not Congress, the Supreme Court, the President, or the Military for comparison`s sake in the United States.
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Sunday, February 01, 2015
The German 10 Year Bund Effectively a Call Option at 30 Basis Points / Interest-Rates / Eurozone Debt Crisis
By: EconMatters
Bonds are not Stocks
On Friday the German 10 Year Bund yield touched the 0.30 mark or 30 basis points, yeah that`s right the same instrument that was yielding 90 basis points in November of last year, a 140 basis points last May 2014, and 195 basis points at the beginning of 2014. It has gotten so ridiculous in the bond markets that I think investors have forgotten what bonds actually are as an asset class, they trade based on price appreciation like stocks, and this perverted mentality has completely ignored the risk component of what bonds represent as debt obligations.
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Saturday, January 31, 2015
Mario Draghi to the Rescue? / Interest-Rates / Euro-Zone
By: Submissions
Antonius Aquinas writes: As expected, the European Central Bank (ECB) headed by former Goldman Sachs executive, Mario Draghi, announced a massive bond-buying program of more than one trillion Euros in the hope of improving a stagnate European economy and to combat “deflation.”
“What monetary policy can do,” Draghi declared, “is create the basis for growth.” The ECB President added that “structural reforms” by the various Euro member states need to accompany the monetary stimulus if it is to succeed: “But for growth to pick up you need investment; for investment, you need confidence; and for confidence, you need structural reform.”*
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Saturday, January 31, 2015
Europe Joins the QE Party / Interest-Rates / Quantitative Easing
By: Frank_Hollenbeck
The European Central Bank (ECB) finally pulled the QE trigger by committing to purchase 60 billion euros of government debt and other assets every month until September of 2016 or until inflation gets closer to 2 percent.
The made-up excuse for this legal counterfeiting is that Europe is dangerously close to having (a very flawed) index of consumer prices drop below zero; as though calamity would strike Europe if the index were to register a negative number. The ECB claims it needs to print money because lower oil prices and — previous to that — a stronger euro were causing average prices to deviate from its 2 percent inflation target. It’s like having your supermarket run a 50 percent off sale on steak one weekend, and then having the ECB try to make all other prices in the supermarket go up so your total bill at the cash register goes up.
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Saturday, January 31, 2015
U.S. Bond Market Has Reached Tulip Bubble Proportions / Interest-Rates / US Bonds
By: EconMatters
Fed Officials Trying to Send Signals to the Bond Market
James Bullard on Friday noted that the Bond Market was far too dovish in relation to where the Fed is in regard to raising rates in June, and this might be the understatement of the year so far. For example the U.S. 2-Year Bond Yield is 0.45 or 45 basis points, think about this for a moment. Even if the Fed fund`s rate finishes the year at 50 basis points which is well below the Fed`s most conservative forecasts, and we use a conservative annual inflation rate of 1% (I know oil has dropped but there are more inflation categories than just the energy component). Moreover, the overall annual inflation rate is well above 1% right now, and you factor in that this bond is paying a 2-year risk premium for tying up one`s capital with all kinds of inflation risks over that 2-year time frame, this has to be the stupidest investment of all time.
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Friday, January 30, 2015
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy / Interest-Rates / US Interest Rates
By: Bloomberg
James Bullard, President of the Federal Reserve Bank of St. Louis, spoke with Bloomberg Television and Bloomberg Radio today about monetary policy, the U.S. economy and the oil market.
Bullard said "Zero interest rates is not the right interest rate for this economy. We are much closer to goals than we've been in a long time. Inflation is a little bit low, but it's not low enough to rationalize the zero interest rate policy."
He said: “The market has a more dovish view of what the Fed is going to do than the Fed itself… Markets should take it at face value." He said it’s “reasonable” to expect an increase in June or July.
Friday, January 30, 2015
Why the European Central Bank's Massive Economic Experiment Will Fail / Interest-Rates / Eurozone Debt Crisis
By: Money_Morning
Peter Krauth writes: Last week, the European Central Bank's turn finally came to announce large-scale quantitative easing.
As the continent witnesses a battle between deflation and attempts at inflation, will it finally be enough?
Europe is following in the footsteps of the United States, hoping for similar "successful" results.
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Tuesday, January 27, 2015
Why 2014's Big Investing Winner Is Still Winning in 2015 / Interest-Rates / US Bonds
By: DailyWealth
Brett Eversole writes: The BIG winner of 2014 will likely surprise you.
U.S. stocks increased a strong 14% last year. But another, much less interesting, asset crushed stocks. It soared 27%. And still, no one is paying attention.
This same boring asset is up 7% so far this year. And last year's big gains could continue throughout 2015.
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Monday, January 26, 2015
How Global Interest Rates Deceive Markets / Interest-Rates / Global Financial System
By: John_Mauldin
“You keep on using that word. I do not think it means what you think it means.”
– Inigo Montoya, The Princess Bride
“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
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Monday, January 26, 2015
Why QE in Europe Will Fail / Interest-Rates / Quantitative Easing
By: Michael_Pento
The fear of deflation has become the cornerstone of Keynesian economic thought. A lack of inflation has been used to explain periods of economic weakness from the Great Depression of the 1930’s, to the Great Recession 2008-2009. And now, that philosophy has been adopted as gospel by those that control the Federal Reserve and virtually every central bank on the planet.
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Monday, January 26, 2015
How Eurozone QE Works: A Guide to Draghi's News / Interest-Rates / Quantitative Easing
By: Money_Morning
Jim Bach writes: European Central Bank President Mario Draghi announced a quantitative easing program today (Thursday) that was complicated, poorly explained, and drastically unlike U.S. QE.
So, to help make sense of this, we drilled down exactly how Eurozone QE works.
First the basics.
Through Eurozone QE, the ECB will pump 60 billion euros ($68.1 billion) a month into the economy. About 10 billion euros of that will come from existing assets and covered bond purchasing programs. But the other 50 billion euros will come from purchases of member countries' sovereign debt, a new development in the Eurozone monetary policy.
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Sunday, January 25, 2015
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy / Interest-Rates / Quantitative Easing
By: Mike_Whitney
Let’s say you’re diagnosed with colorectal cancer. But instead of going to a professional for help, you decide to treat yourself with glycerol suppositories and high doses of Vitamin C.Well, then, you’re probably going to die, right?This same rule applies to economics. If you try to reduce unemployment and boost growth by doing something completely unrelated to the problem itself, like dumping trillions of dollars into financial assets, then you’re not going to get the results you want.This is largely the problem we face today. All of the economies controlled by the western bank cartel–Australia, Canada, US, UK, Eurozone, and Japan—are suffering from chronic lack of demand, the likes of which could be easily remedied by following Keynes recommendation of “government directed investment”.
Sunday, January 25, 2015
The European Central Bank Commits Monetary Suicide / Interest-Rates / ECB Interest Rates
By: Jeff_Berwick
Yesterday the European Central Bank (ECB) announced an expanded 1.1 trillion euro (US$1.3 trillion) asset purchase program to start in March 2015 and continue through September 2016 (19 months) that will include the purchases of sovereign (national government) debt. It plans to purchase roughly 60 billion euros ($68 billion) worth of securities monthly, up from about 13 billion, with most of the additional purchases to be allocated to sovereign (national government) debt with a quarter expected to end up in scarce German bunds. The purchases will be restricted to investment grade issues, which would mean no purchases at all if the condition were applied diligently, and will include non investment grade issues like Greek bonds if they have an ongoing budget/spending agreement with the ECB-IMF in place.
Friday, January 23, 2015
Euro-zone 'QE already Working' Says IMF Lagarde / Interest-Rates / Quantitative Easing
By: Mike_Shedlock
Today, ECB president Mario Draghi announced his much awaited QE program that will allegedly save Europe from the imaginary perils of price deflation. See Deflation Bonanza! (And the Fool's Mission to Stop It).
Stocks are up a bit, the dollar is up a bit, the yen is up a bit, and gold is up a bit. Oil is down a bit.
The details are more or less along the lines most thought, not the celestial "big bang" that everyone hoped.
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Friday, January 23, 2015
Is 1.2 Trillion Euros The Right Answer To The Wrong Question? / Interest-Rates / Quantitative Easing
By: DK_Matai
Good News Or Bad News?
Once upon a time something good happened for Europe. The price of oil went down dramatically. When the oil price halved in the last months of 2014, there was no way for the European Central Bank (ECB) to fulfill its mandate of keeping price growth close to 2 percent a year. The ECB painted itself into a corner by targeting headline inflation, not core inflation, which excludes food and energy. Left with no choice, the ECB announced on 22nd January 2015 that it would begin printing digital money in large quantities, ie, start Quantitative Easing or QE in the near future. Contrary to popular myth, QE doesn't fight 'deflation', it rather causes it by keeping zombie banks alive. Why? Quantitative easing simply buries money in commercial bank vaults, by bolstering their balance sheets, when it is cash in circulation that is desperately needed.
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Thursday, January 22, 2015
Are Plunging Petrodollar Revenues Behind the Fed’s Projected Rate Hikes? / Interest-Rates / US Interest Rates
By: Mike_Whitney
Why is the Fed threatening to raise interest rates when the economy is still in the doldrums? Is it because they want to avoid further asset-price inflation, prevent the economy from overheating, or is it something else altogether? Take a look at the chart below and you’ll see why the Fed might want to raise rates prematurely. It all has to do with the sharp decline in petrodollars that are no longer recycling into US financial assets.
Monday, January 19, 2015
Where Would Interest Rates Be If The Fed Didn't Exist? / Interest-Rates / US Interest Rates
By: Michael_Pento
On January 7th CNBC's Rick Santelli and Steve Leisman engaged in a heated debate that posed an interesting question; is the free market at work keeping interest rates low, or is it the central banks' put? This made me consider the real question to ask which is: Where would rates be if central banks didn't exist?
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