Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Monday, December 07, 2020
What Do We Do with All This Debt? / Interest-Rates / US Debt
By: John_Mauldin
Before the coronavirus pandemic I expected the US would hit the debt wall in the late 2020s. Now, the debt is growing even faster and we will hit that wall a lot sooner.
What happens when we come to the place where we have to deal with all that debt?
Fortunately, my favorite central banker, Bill White -- who was the Bank for International Settlements' chief economist -- did a brilliant interview with my friend Mark Dittli in Switzerland in November that gives us some answers.
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Monday, November 23, 2020
Evolution of the Fed / Interest-Rates / US Federal Reserve Bank
By: Michael_Pento
The evolution of humankind supposedly goes something like this: From a void and through a series of serendipitous happenstances arose; galaxies, the Earthly Primordial ooze, Bacteria, Monkeys, and eventually homo sapiens (wise man). The evolution of the Fed is deserving of equal derision, but with a much worse outcome.Back in 1913, the Federal Reserve Act gave birth to the Federal Reserve System. The law gave power to the central bank to become a lender of last resort to financial institutions. If a bank found itself in trouble, it could approach the discount window and exchange 100% guaranteed government debt for Fed credit at a deep discount. This process defined the majority of the Fed's role for decades to follow.
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Wednesday, November 18, 2020
US Bond Market: "When Investors Should Worry" / Interest-Rates / US Bonds
By: EWI
The cost of insuring against default has been declining – what this may suggest
You may recall hearing a lot about “credit default swaps” during the 2007-2009 financial crisis.
As a reminder, a CDS is similar to an insurance contract, providing a bond investor with protection against a default.
In the past several months, the cost of that protection has fallen dramatically.
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Friday, November 13, 2020
Eyeing Upside in US Bonds TLT / Interest-Rates / US Bonds
By: Mike_Paulenoff
Is it a coincidence that 10-Year YIELD climbed to 1.00% from 0.75% in the days following Pfizer's vaccine announcement (and perhaps in reaction to the apparent result of the Presidential Senate elections), and then hit a wall?
Not if we consider the big bad Fed lurking out there, scarfing up all Treasury supply even if the economic data appear to be stronger than expected.
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Friday, November 13, 2020
Global "Debt Mountain": Beware of This "New Peak" / Interest-Rates / Global Debt Crisis 2020
By: EWI
Prepare now for a situation that is "building to an epic finale"
Most people going about their daily business probably never give a moment's thought to global debt.
But, in EWI's view, the topic deserves serious attention.
You only have to think back to the 2007-2009 subprime mortgage meltdown to know why. Of course, subprime mortgages are a form of debt, and when many of these loans turned sour, the entire global financial system teetered on the brink of collapse.
But, why were so many of these bad loans made in the first place? It boils down to one word: confidence ... confidence that the loans would be repaid, confidence that the stock market would continue to rally, confidence in the economy and confidence in the future, in general.
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Monday, November 09, 2020
Is Fed Chairman Powell the Real Election Winner? / Interest-Rates / US Federal Reserve Bank
By: MoneyMetals
As President Donald Trump continues to insist that he will be the winner of the election after all the legitimate votes are counted and the illegitimate ones thrown out, at least one publication has declared a different winner. Not Joe Biden, but Federal Reserve chairman Jerome Powell.
The Wall Street periodical Barron’s argued Powell has become a more important figure for markets than whoever occupies the White House.
Even as the presidential election outcome has been beset by uncertainty all week, Wall Street didn’t panic. Quite the opposite. Stocks surged on expectations for divided government and gridlock – and four more years of Fed stimulus.
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Wednesday, November 04, 2020
How to Stay Ahead of Price Turns in the U.S. Long Bond Market / Interest-Rates / US Bonds
By: EWI
This method of analysis applies to any widely traded financial market
Back in August, the volatility index for Treasury debt was at an all-time low, indicating record commitment to the idea the markets would continue to calmly rise.
Indeed, here's a July 27 Bloomberg headline:
Bond Investors Are Getting Fresh Reasons to Stay Record Bullish
Bloomberg mentioned U.S.-China tensions as a reason that investors would seek a safe haven in bonds, hence, pushing prices higher.
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Wednesday, October 14, 2020
US Debt Is Going Up but Leaving GDP Behind / Interest-Rates / US Debt
By: John_Mauldin
We have plenty of evidence that US debt will balloon to $50 trillion by 2030, maybe more. Many smart people conclude that, in the meantime, the federal debt isn’t a problem.
Looking at the numbers as a percent of GDP—and considering the CBO long-term forecasts out to 2050—Sam Rines, whom I greatly respect, writes this:
"In its latest round of projections, by far the most intriguing portion of the analysis related to the dynamics around the US federal debt load. The US debt load has increased dramatically due to the response to COVID, but the ability to service the US debt load is actually improving.
Thursday, October 08, 2020
5 Consequences of US Debt at $50 Trillion / Interest-Rates / US Debt
By: John_Mauldin
With the US set to breach the $50 trillion mark in debt by 2030, here are five things we should start thinking about sooner rather than later.
1. Raising taxes will not solve the problem. Of course, it could help reduce the deficit some, but it would be more of a token. That is just the reality. From the Tax Foundation, here are the real numbers as of 2017.
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Monday, October 05, 2020
To US $50 Trillion Debt (and Beyond) / Interest-Rates / US Debt
By: John_Mauldin
In my 2020 forecast letters, published in January as the pandemic was just gaining attention, I noted this:
"When we do have a recession, which again I point out is likely to be after the election (the only meaningful data point between now and the end of next year), the deficit will explode to over $2 trillion per year and, without meaningful reform, never look back. That puts US debt at $35 trillion+ by the end of 2029."
According to CBO, this deficit -- which I said optimistically, in hindsight, would be over $2 trillion in a recession year -- will be more like $3.3 trillion.
What does this do to the national debt? First, we have to define some terms.
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Tuesday, September 29, 2020
Fractional-Reserve Banking Is The Elephant In The Room / Interest-Rates / Global Financial System
By: Kelsey_Williams
The expression “elephant in the room“…
“…an important or enormous topic, question, or controversial issue that is obvious or that everyone knows about but no one mentions or wants to discuss because it makes at least some of them uncomfortable or is personally, socially, or politically embarrassing, controversial, inflammatory, or dangerous. (source)
A wordy definition, yes; but it is applicable to our topic of Fractional-Reserve Banking. After reading the rest of this article, you should be able to see just how important and enormous Fractional-Reserve Banking is; as well as how dangerous.
Lets’s start with some history.
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Tuesday, September 22, 2020
Central Banking Cartel Promises ZIRP Until at Least 2023 / Interest-Rates / Negative Interest Rates
By: MoneyMetals
Gold and silver investors who were hoping Wednesday’s FOMC meeting would be a catalyst for a major breakout move were largely disappointed.
The metals complex didn’t see an immediate boost from the Federal Reserve’s dovish policy meeting. Still, the central bank’s commitment to an accommodative monetary policy is set to play out not just over the course of a week, but of years to come.
On Wednesday, the Federal Reserve announced it would continue to hold its benchmark interest rate near zero. That came as no surprise.
However, the extent of the Fed’s commitment to avoid any rate hikes in the future raised the eyebrows of many veteran observers of monetary policy. Not only did members of the central banking cartel vow to keep rates down for the remainder of the year. They also signaled there would be no rate hikes in 2021.
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Wednesday, September 09, 2020
QE4EVER! / Interest-Rates / Quantitative Easing
By: Nadeem_Walayat
Virtually everything that cannot be easily printed is rocketing higher which includes GOLD! It's not hard to see why as a consequence of rampant money printing by governments across the world in the wake of the Coronavirus Pandemic economic depression. For instance the UK alone looks set to print about £550 billion this year most of which will be monetized by the Bank of England so that the government can pay the wages of about 1/3rd of Britains workforce for a good 6 months with likely many more economic stimulus measures to follow over the next 6 months towards fighting the Pandemics dire economic consequences.
Whilst the United States has printed $2.2 trillion of stimulus dollars to date with at least another $1.3 trillion to come, that's $3.5 trillion which dwarfs the 2008 financial crisis bailout of $720 billion. Funneling stimulus checks on an epic scale into the back pockets of every working age citizen. Printing money has REAL consequences which is REAL inflation hence what we have been witnessing in markets across the spectrum, and whist I have yet to take a peak at the housing markets, I would not be surprised if the UK housing market at least will start to experience a money printing inflationary boom over the coming year, this despite the fact that people have less disposable income to buy housing, but more on that in a future article.
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Thursday, September 03, 2020
Understanding the Fed's True Mandate / Interest-Rates / US Federal Reserve Bank
By: The_Gold_Report
Michael Ballanger interprets the motives of the Federal Reserve and their impacts on the "haves" and "have nots" in America and beyond.
This week, the financial community around the globe was handed a "new approach" by the Federal Reserve Board of the United States that essentially flipped the middle finger at savers, senior citizens on limited pensions and proponents of sound money principles. Before I expand upon this outrage, let me expound upon the background of the current Fed Chairman, Jerome Powell.
Judging from the accolades and fawning praise showered upon this man (as the S&P and NASDAQ hit record levels fueled exclusively by Fed stimuli), one might think that he hails from the academic world, a scholar with vast experience in macroeconomic theory, or at least extensive dealings in the retail banking sector. His grandfatherly deportment portrays great studiousness and wise counsel as he does his very damnedest to convey that image with perennial gray suits and trademark purple ties. If one could take this carefully crafted persona and make a snap favorable assessment of the man who controls the retirement lifestyles of millions of global citizens, one would be making a fatal error.
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Wednesday, August 26, 2020
Fed Rules Out Yield Curve Control (for now) / Interest-Rates / Inverted Yield Curve
By: Gary_Tanashian
That we are even having this conversation is proof that we are and have been in…Wonderland for years now.
Since at least 2001, actually. Back then Alan the Wizard Greenspan (mixing classic fairy stories, I know) began pulling levers that could never be un-pulled. There were no breadcrumbs with which to find our way back. Off the charts is off the charts. Exponential is exponential. And that’s when funny munny out of thin air entered the realm of normalcy; new normalcy where the financial system is concerned.
I assume that the ‘tool’ known as yield curve control (per this article) is part of MMT (Modern Monetary Theory) TMM (Total Market Manipulation) that the eggheads promote with not an ounce of historical monetary grounding, caution or even human-like soul. They are monetary Humanoids, AKA bureaucrats, AKA economic Ph.Ds with more statistical and theoretical knowledge than common sense. They released the FOMC minutes and policy micro-managers offer their interpretations.
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Tuesday, August 04, 2020
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs / Interest-Rates / Corporate Bonds
By: EWI
Default rates of low-grade corporate debt are risingThe demand for junk bonds is running high among global investors -- again.
As the Wall Street Journal noted on June 9:
Europe's riskiest corporate debt has rallied to pre-crisis levels.
Elliott Wave International's July Global Market Perspective, a monthly publication which covers 40-plus market worldwide, showed this chart and said:
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Thursday, July 16, 2020
Fiscal Cliffs and the Self-destructing Treasury / Interest-Rates / US Bonds
By: Michael_Pento
We can all be very confident that there will be no change to monetary policy for a very, very long time. But there is a fiscal cliff coming—and indeed has already begun.
It is clear that Mr. Powell is all-in on his unlimited QE and ZIRP. And, that he is "not even thinking about thinking about raising interest rates." Therefore, the stock market does not have to worry about a contraction in the rate of money printing any time soon. However, equities could soon plunge due to the crash in the amount of fiscal support offered to the economy.
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Tuesday, June 30, 2020
Fed Trampoline Cliff Diving / Interest-Rates / US Interest Rates
By: Michael_Pento
We start this week's commentary with some rather depressing news from Reuters:
The ratio of downgrades to upgrades in the credit ratings of leveraged loans has spiked to a record level, five times above that hit during the last global financial crisis, reflecting the unprecedented stress in risky assets due to the coronavirus pandemic. Leveraged loans, which are loans taken out by companies that have very high levels of debt, usually with non-investment grade credit ratings--tend to be used by private equity firms as a way to fund acquisitions of such companies. The U.S. leveraged lending market has grown to more than $2 trillion, up 80% since the early 2010s, according to credit rating agency Moody's Investors Service.
Saturday, June 27, 2020
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" / Interest-Rates / US Bonds
By: EWI
Here's an update on the trend of 30-year U.S. Treasuries since the historic early March price moves
Back in early March, the behavior of the bond market was reminiscent of what unfolded during the depths of the 2007-2009 financial crisis.
Prices and yields were making major moves in a short period of time.
On March 5, the U.S. Treasury long bond closed at 173^30.0. The very next day, on March 6, the long bond rallied to 180^19.0, a whopping 6+point move, reaching a new all-time high.
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Monday, June 01, 2020
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? / Interest-Rates / Money Supply
By: Chris_Vermeulen
M2 Velocity is the measurement of capital circulating within the economy. The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth. When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.
The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market collapse. It appears to our researchers that these extended periods of zero interest rates deflate the capability of money circulating throughout the economy and engaging in real growth opportunities for investment and capital inflation.
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