Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Monday, October 20, 2014
A Funny Thing Happened on The Way to Raising Rates / Interest-Rates / US Interest Rates
By: Michael_Pento
It wasn't too long ago that the stock market was busy celebrating a "great" September jobs report. There were 248k net new jobs created and the unemployment rate dropped to 5.9 percent. Janet Yellen, Ben Bernanke and the rest of Washington D.C.'s central planners deemed it a great time to take a Keynesian victory lap, basking in the delusion that they now have proved you actually can print and borrow your way to prosperity.
And, because of their success, the Fed would be able to raise interest rates without any damage to the economy.
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Thursday, October 16, 2014
Why the Fed Should Consider Delaying the End of QE / Interest-Rates / Quantitative Easing
By: Bloomberg
James Bullard, President of the St. Louis Federal Reserve Bank, told Bloomberg Television's economics editor Michael McKee today that the Fed should consider delaying the end of QE.
Bullard said, "I also think that inflation expectations are dropping in the U.S. And that is something that a central bank cannot abide. We have to make sure that inflation and inflation expectations remain near our target. And for that reason I think a reasonable response of the Fed in this situation would be to invoke the clause on the taper that said that the taper was data dependent. And we could go on pause on the taper at this juncture and wait until we see how the data shakes out into December. So...continue with QE at a very low level as we have it right now. And then assess our options going forward."
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Wednesday, October 15, 2014
Comparing One Dimension of the Policy Responses of the ECB and the Federal Reserve / Interest-Rates / Central Banks
By: Jesse
Here is a chart comparing the Balance Sheet Assets of the Fed and the European Central Bank.
It is important to recall that the Fed has been providing extensive funding to non-US, largely European, multinational Banks through their US subsidiaries.
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Tuesday, October 14, 2014
Inflation, Deflation, and Our Very Confident Bet in T-Bonds / Interest-Rates / US Interest Rates
By: Rick_Ackerman
I’ve been touting the ongoing bull market in T-Bonds as one of the best investment opportunities of our lifetime – a no-brainer, as far, as I can recommend. About the only way this bet can lose is if inflation returns with a vengeance. This has never been much of a worry for me, since, on the inspiration of C.V. Myers’ prescient 1976 book, I’ve been writing about the threat of deflation for more than 20 years. As Myers noted, every penny of very debt must eventually be paid – if not by the borrower, then by the lender. So far, lenders have hung tough on their terms, and although a recklessly expansive monetary policy has cut mortgage debtors in particular some slack, there is no reason to think private lenders will let homeowners skip free when the second stage of the housing collapse that began in 2007 begins anew. Deflation-wise, this is where the rubber will meet the road, drawing irresistible power from the inevitable implosion of the quadrillion dollar Ponzi scheme popularly known as “derivatives.”
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Sunday, October 12, 2014
New Zero Bound Only Game In Town / Interest-Rates / Financial Markets 2014
By: Richard_Mills
The Federal Reserve tried to fix the U.S. economy by Quantifornication - stimulus measures.
Investors reacted to the Fed's unconventional efforts. Since the U.S. dollar is the world's reserve currency and precious metals are priced in dollars they bought gold and silver to protect their wealth against currency devaluation and inflation.
Gold catapulted to a record in 2011 as investors wagered on higher inflation and a weakening dollar.
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Sunday, October 12, 2014
The 5–Year U.S. Treasury Bond is Emblematic of Careless Risk Taking in Bond Markets / Interest-Rates / US Bonds
By: EconMatters
Dovishness Begets Excessive Risk Taking by Speculators
The Fed minutes came out this past week and they mentioned the strong dollar and less than stellar growth out of Europe, basically more over the top dovishness which just encouraged more unwise risk taking in the bond markets. This week Dallas Fed's Fisher said that they have identified areas of risk in markets, and James Bullard has said on several occasions that the markets are even behind the most dovish participants at the Federal Reserve regarding the forecasts for rate hikes, and the actual market actions of participants.
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Friday, October 10, 2014
The Fed Risk - Upside Down and Backwards: Here We Go Again / Interest-Rates / US Federal Reserve Bank
By: MISES
"There are some ideas so wrong that only a very intelligent person could believe in them." -George Orwell
In a recent widely distributed associated press article, Bond Market Bubble is Looking
Fragile, Bernard Cohen correctly (remarkably) identifies the financial bottleneck threatening to once again freeze credit markets a la The Lehman Crisis.
Cohen paints the portrait of a bond market panic; the very sort that could easily trigger the type of crash that could "get away" from policy makers and morph into a full blown currency crisis.
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Saturday, October 04, 2014
The Fed Cannot Wait For Wage Inflation to Raise Interest Rates / Interest-Rates / US Interest Rates
By: EconMatters
5.9% Unemployment Rate
Friday, October 03, 2014
U.S. Bond Market Fourth Quarter Trade of 2014 / Interest-Rates / US Bonds
By: Chris_Vermeulen
If you have been paying close attention to the stock market, market internals/breadth, and bonds for the past three months, you’ve likely come to the same conclusion that I have.
The US stock market is showing signs of severe weakness with the market breadth and leading indicators pointing to a sharp correction for stock prices.
With fewer stocks trading above their 50 and 200 day moving averages each week, while the broad market S&P 500 index continues to rising, this bearish divergence is a red flag for long term investors.
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Thursday, October 02, 2014
U.S. 30 Year US T-Bonds Voodoo Analysis / Interest-Rates / US Bonds
By: Austin_Galt
There looks to be a solid opportunity arising to get involved on the long side here. Let's investigate taking a top down approach beginning with the yearly chart.
Wednesday, October 01, 2014
“Back Door” Method For The Government To Pay Down The Federal Debt Using Private Savings? / Interest-Rates / US Debt
By: Dan_Amerman
The United States government is currently about $17.5 trillion in debt. To place this number in perspective: if we assume that only the above-poverty line households will be making net contributions towards paying this enormous debt, this means that the national debt equals about $180,000 for each "able to pay" household in the US.
With traditional financial planning, the most common way of dealing with this problem – is to completely ignore its existence. Rather than try to incorporate the effects of this massive debt that could transform interest rates, economic growth and rates of return for decades – most investment plans for individuals simply pretend it doesn't exist.
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Wednesday, October 01, 2014
How stable is the U.S. Bond Market? / Interest-Rates / US Bonds
By: BATR
Seldom does the enormous bond market turn on the fate of a single trader. Well, the news that Bill Gross was leaving Pimco under suspicious circumstances did not go unnoticed. The WSJ writes:
“The yield on the 10-year benchmark Treasury note was hovering around 2.506% immediately before the disclosure that Mr. Gross was leaving the hundreds-of-billions of dollars in Treasurys and other debt he oversaw at Pimco to go to rival firm Janus Capital Group Inc.
Within a half-hour, the yield jumped to 2.546%. While a move of 0.04 percentage point may not seem like much in that period of time, it was perceptible enough in the $12 trillion Treasury market that several traders and strategists attributed it to the news about Mr. Gross.”
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Wednesday, October 01, 2014
Why The U.S. Fed WILL Raise Interest Rates / Interest-Rates / US Interest Rates
By: Raul_I_Meijer
This is not the first time I’ve written on this topic, but I want to do it again, because rate hikes, when they come, will have a tremendous effect on everybody’s loves and economies, wherever you live. And because I think there’s still far too much complacency out there, far too much ‘conviction’ that higher rates will come only after a comfortable period of time, and even then only gradually.
There are three steps in the Fed’s ‘policies’. There’s QE, which will end in October. There’s ultra low interest rates, which have so far been maintained. And then there’s the dollar, whose rate many people still think is determined by the ‘markets’, even if the Fed is in effect the ‘markets’. When the Fed buys, or makes third parties buy, bonds and stocks (and we know it has), it’s not going to let the dollar roam free. That makes no sense.
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Wednesday, October 01, 2014
Using Put Options to Bet on a Junk-Bond Crash / Interest-Rates / Corporate Bonds
By: Submissions
Rick Ackerman writes: Here’s an easy play for those who have never cashed a winning ticket trading put or call options. Specifically, I am going to tell you how to bet on a junk-bond crash without risking your shirt — even if junk bonds continue to defy gravity indefinitely. First, let me assert that straight-up directional plays with stock options almost never win. Your odds are better trying to predict precisely when a shooting star will flash across the night sky. Similarly, if you buy call options with the expectation that a stock is about to surge, your timing had better be perfect, since the options you’ll be buying will be priced to discount any such event. Indeed, to make money on the calls, the move in the underlying vehicle would need to be so steep as to lie well outside the stock’s historical behavior. Moreover, as implied above, you would need to initiate the trade just before the rally takes off, since, if you get in early, time decay will sap the value of your calls quickly. And you can forget about getting aboard after the rally has begun, since option prices will be goosed into the stratosphere mere minutes after the stock lurches higher.
Tuesday, September 30, 2014
Dallas Fed Fisher: Would Like To See U.S. Interest Rate Lifoff At End Of First Quarter / Interest-Rates / US Interest Rates
By: Bloomberg
In an interview with Bloomberg Radio's Kathleen Hays and Vonnie Quinn, Federal Reserve Bank of Dallas President Richard Fisher said he would like to see interest-rate increases start at the end of the first quarter and continue in quarter-point increments.
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Thursday, September 25, 2014
The Specter of Global Debt Default is Once Again Rearing its Head / Interest-Rates / Global Debt Crisis 2014
By: EWI
Editor's note: The following article was republished here with permission from the co-editors of the September issue of The Elliott Wave Financial Forecast, a publication of Robert Prechter's Elliott Wave International, the world's largest financial forecasting firm. From Sept. 25 to Oct. 1, EWI is throwing open the doors to all of its investor services 100% free. Click here to join EWI's free Investor Open House now.
Thursday, September 25, 2014
Federal Reserve Policies Cause Booms and Busts / Interest-Rates / Liquidity Bubble
By: MISES
Richard M. Ebeling writesL Since the economic crisis of 2008-2009, the Federal Reserve — America’s central bank — has expanded the money supply in the banking system by over $4 trillion, and has manipulated key interest rates to keep them so artificially low that when adjusted for price inflation, several of them have been actually negative. We should not be surprised if this is setting the stage for another serious economic crisis down the road.
Wednesday, September 24, 2014
US Government - The World’s Largest Subprime Debtor / Interest-Rates / US Debt
By: David_Howden
Lehman Brothers filed for Chapter 11 bankruptcy protection six years ago this month. The event has become famous as the spark that ignited the global financial crisis. Since that date, millions have lost their jobs and livelihoods, and countless others have seen their futures evaporate before their eyes, sometimes permanently.
At the heart of the crisis of 2008 was a common cause acknowledged by almost all commentators. Borrowers now infamously known as “subprime” (or more politely, “non-prime”) were the main reason behind the meltdown. As financial institutions extended loans to those with less than stable means to repay their debts, the foundation of the financial world was destabilized.
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Monday, September 22, 2014
Why U.S. Interest Rates They’re Not Headed Up Anytime Soon / Interest-Rates / US Interest Rates
By: DailyGainsLetter
George Leong writes: The Federal Reserve has spoken and to no one’s surprise, there was really nothing new from Fed Chair Janet Yellen, who did as was expected after shaving off another $10.0 billion in monthly bond purchases. The Federal Reserve will cut the remaining $15.0 billion in October, bringing its third round of quantitative easing (QE3) to an end.
What the stock market here and around the world also heard was that the Federal Reserve will likely maintain its near-zero interest rate policy for a “considerable time” after the QE3 cuts.
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Monday, September 22, 2014
Interest Rate Doves Don't Know History / Interest-Rates / US Interest Rates
By: Michael_Pento
A wise saying goes like this; "Those who do not remember history are condemned to repeat it." So ask yourself; what is the fate of those who seem to have absolutely no recollection of events that happened just a few years ago?
We are nearing the end of 2014, and to the debt markets, it is almost as if the 2008 economic collapse never happened. It appears that borrowers and lenders are suffering from a severe case of collective amnesia. Yes, consumer debt levels took a slight breather in 2009-10. But today, total consumer credit in the U.S. has risen by 22 percent over the past three years, and at this point 56 percent of all Americans have a subprime credit rating.