Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Monday, March 24, 2014
Message to the U.S. Fed: Here Are a Few Things That You Can’t Do / Interest-Rates / US Federal Reserve Bank
By: F_F_Wiley
[A]sset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. -March 19 FOMC statement
The excerpt above or some variation has appeared in every one of the Fed’s post-FOMC meeting statements since the beginning of QE3 in September 2012.
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Thursday, March 20, 2014
Fed Changes the Rules to Maintain ZIRP / Interest-Rates / US Interest Rates
By: Michael_Pento
The New Chairperson of the Federal Reserve showed off her dovish feathers after the latest meeting of the FOMC. Ms. Yellen abrogated the threshold of 6.5% on the unemployment rate as the starting point for short term rate hikes and replaced it with amorphous and ambiguous language that allows plenty of wiggle room with rates.
Just like a child sometimes changes the rules of a game in mid-stream in order to guarantee a favorable outcome, the Fed has ripped up the rulebook to suit its own needs.
Wednesday, March 19, 2014
Bank of England Lights A Fuse Under the Field of Economics / Interest-Rates / Quantitative Easing
By: Raul_I_Meijer
There will be many people who don’t care, there will be many more who don’t understand, and there will be boatloads who refuse to believe it’s true, but it still is. The Bank of England, in one single document, discredited, just at first count, 1) the majority of economics textbooks, 2) vast swaths of the entire field of economics, run as it is by economists educated by those same textbooks, 3) most governments’ economic policies, designed by these economists, 4) much of its own work, also designed by the same economists, 5) Paul Krugman and 6) the “committee” that hands Krugman and his ilk their Not-So-Nobel Prizes.
Tuesday, March 18, 2014
Interest Rates - Is Yellen Fishing for Gold? / Interest-Rates / Gold and Silver 2014
By: Axel_Merk
If interest rates are supposed to be on the rise, why has the price of gold gone up so much this year? Is it merely because it is bouncing back after a sharp decline in 2013? We have a closer look at the link between gold and interest rates to gauge how investors may want to approach the bait provided by the Fed.
Friday, March 07, 2014
Crimea Crisis - Euro-zone Economy Hide and Seek / Interest-Rates / Euro-Zone
By: Raul_I_Meijer
Crimea just declared itself part of Russia. Well, its government did. What the status is of that government is unclear, but then that’s also true for the Ukrainian government, which the west is all too eager to declare the one and only. Perhaps the first thing to do for the US and EU is to sit down with Russia and agree on the legal standing of the Kiev government, since without any such agreement no progress can be achieved. They’d have to do that without “Yats” present, because Russia doesn’t recognize him as a talking partner. Putin can promise to leave Yanukovych home if the US does the same with “Yats”.
Thursday, March 06, 2014
Janet Yellen Another Go / Interest-Rates / US Federal Reserve Bank
By: Fred_Sheehan
Advocates for Federal Reserve disclosure harp on the five-year wait for FOMC transcripts. The reasoning goes that institutions in a democracy should be more democratic: let the people know what the Fed plots behind closed doors. The question arises: to what end?
The 2008 transcripts were released in late-February. Most media operations published stories about the Fed's absent-minded professors who missed the importance of failing financial institutions during 2008. This was not news. That has been described over the past five years, among other places, in Panderer to Power. The release, however, was an opportunity to remind investors, retirees, florists, and students receiving government financing of their precarious state.
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Saturday, February 15, 2014
Watch For A Fed QE Taper Time-out / Interest-Rates / Quantitative Easing
By: Sy_Harding
Good luck to new Fed Chair Janet Yellen and her expectation that the Fed can continue to taper back its QE stimulus at the current pace until it is completely gone by summer.
The economic reports say it is not going to happen.
In her optimism regarding the economy, expressed in her testimony before Congress this week, Yellen pointed to GDP growth hitting an average annual rate of 3.5% in the last half of last year, compared to only 1.7% in the first half.
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Thursday, February 13, 2014
A Second Look at U.S. Savings Bonds / Interest-Rates / US Bonds
By: Don_Miller
If you remember bond drives in school, please raise your hand. There are still a lot of us out there. I recall my teacher holding up a US Savings Bond, encouraging us to tell our parents to buy them. She went to great lengths emphasizing that they were the "the safest investment on earth."
Wednesday, February 12, 2014
Strength of Yellen's leadership crucial to success of Fed Taper / Interest-Rates / US Federal Reserve Bank
By: MahiFX
Janet Yellen delivered a flawless performance in her first Humphrey Hawkins testimony as US Federal Reserve Chairwoman, but that performance may mask a weak leadership and that could have grave consequences for the tapering of the Fed's bond purchases.
At stake is the 'smooth' winding down of the Fed's quantitative easing programme – the biggest and boldest monetary stimulus in history. Emerging market wobbles aside, the exit hasn't been nearly as disruptive as it could have been, though it is still in the early stages.
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Tuesday, February 11, 2014
No Honeymoon for Janet Yellen / Interest-Rates / US Federal Reserve Bank
By: Axel_Merk
On Janet Yellen’s first day on the job as Fed Chair, the Dow Jones Industrial Average dropped 326 points; 10-year Treasury yields fell to a mere 2.58%. While a day does not set a trend, let alone create a legacy, there is no honeymoon for Janet Yellen. Volatility, seemingly absent in 2013, is back, with major implications for investors’ portfolios.
Monday, February 10, 2014
Debt Deleveraging Deception Continues / Interest-Rates / Global Debt Crisis 2014
By: Michael_Pento
I first wrote about the “Deleveraging Deception” back in September of 2010. Unfortunately, those that would have you believe the economy has paid down its excessive debt levels are still at work trying to deceive you. But here’s the truth.
In order to perpetuate their deception that the economy has deleveraged, many Wall Street pundits often site the statistic that Household Debt Service payments as a percentage of disposable income has fallen to 9.2%, the lowest level since 1980 and down from 13.18% at the peak of the Great Recession.
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Friday, February 07, 2014
How Can Money Printing Exist and be Absent at the Same Time? / Interest-Rates / Quantitative Easing
By: Matt_Machaj
In the past years, the Federal Reserve dropped many inflationary bombs on the markets. Inflationary in the purely monetary sense by supplying money in almost ridiculous amounts, especially base money figures. During this process some commentators believed that the dollar would soon evaporate, that investors will run away in favor of the euro (like the EBC had not been printing euros for their banks), or maybe in favor of the yen (like the Japanese central bank was not that inflationary), or who knows maybe even the yuan. The dollar was supposed to be either dropped by international investors, or killed from within by internal inflationary rates (or possible by those two factors combined together). None of this happened. How are we to explain this if the Fed went almost crazy in monetary creation?
Wednesday, February 05, 2014
Challenging the Consensus for Rising Interest Rates / Interest-Rates / US Interest Rates
By: John_Mauldin
One of the most universal consensus calls in the markets today is that interest rates are destined to rise. Thirteen out of 13 major investment banks all think that interest rates for global fixed-income will rise this year. I get nervous when everybody is on the same side of the boat. And so does my good friend and business partner Niels Jensen of Absolute Return Partners in London. This week’s Outside the Box is another of his thoughtful essays, giving us five reasons why interest rates may in fact go down this year. That is not to say that we don't both agree that rates have to go back up eventually, but to us the timing is not so obvious as it is to the major investment banks. Rather than tip his thunder, I’ll let Niels advocate for his position. (And you can see more of his consistently excellent work at www.arpinvestments.com.)
Wednesday, February 05, 2014
From the Bernanke Put to the Yellen Trap, Debt Rattle 2014 / Interest-Rates / US Federal Reserve Bank
By: Raul_I_Meijer
Sifting through the debris after the initial wave of the year’s first major storm has subsided, there’s no escaping the realization that the damage is structural, this was no incident, and the next wave may well topple the whole structure. Its foundations have been impaired so thoroughly by many years of intentional neglect that the only sensible thing to do is to raze it, lay down new foundations, and erect a whole new edifice.
Ironically, it’s the utter contempt for the free market system as exhibited by the major players in what still poses as a capitalist society, that has done us in. Recklessly flooding the entire premises with ultra cheap liquidity is the one thing the building proved to have no resistance against. Turns out, if you don’t replace weak pieces with new and stronger ones, if you don’t throw out what has started rotting, you end up compromising the entire foundations.
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Wednesday, February 05, 2014
U.S. Taxes, Entitlements and Federal Debt: The CBO’s Latest Projections / Interest-Rates / Government Spending
By: PhilStockWorld
Courtesy of Doug Short: This morning the Congressional Budget Office published its Budget and Economic Outlook: 2014 to 2024, available as a 175-page PDF file. The main body of the document is divided into four parts: The Budget Outlook, The Economic Outlook, The Spending Outlook and The Revenue Outlook. The Appendix, which constitutes over half the document, covers a range of topics, including four decades of historical data.
Saturday, February 01, 2014
U.S. Treasury Bonds Defying Dire Forecasts / Interest-Rates / US Bonds
By: Sy_Harding
There was no doubt about it in 2013. If the Fed were ever to cut back on its five years of massive QE bond-buying, bond prices would collapse.
It made sense. Of the $85 billion a month of QE, $40 billion was in mortgage-backed securities, and $45 billion in Treasury bonds.
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Saturday, February 01, 2014
Emerging Markets, Interest Rates and QE Tapering / Interest-Rates / Emerging Markets
By: Alasdair_Macleod
Thanks to the Fed's tapering, a wider public is becoming aware of currency instability in diverse economies, from Turkey to Argentina, and India to Indonesia. Indeed, on Tuesday night Turkey raised overnight interest rates by a whopping 4.5% to 12% in an attempt to stop a run on the lira.
Turkey has her own political problems, perhaps strong enough to knock the stuffing out of her currency on their own, and Argentina seems to be permanently fighting off hyperinflation. But it is a mistake to think that the idiosyncrasies of each currency are solely the cause of their downfall. The fact that these countries' currency problems are all happening at the same time tells us the common factor is currency itself.
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Friday, January 31, 2014
FOMC on Future U.S. Interest Rates / Interest-Rates / US Interest Rates
By: Matt_Machaj
In terms of asset purchases monetary policy was, is and will be accommodative. More importantly so is the case with interest rates, which are still flirting with zero percent range - despite the fact that that lowering was believed by some to be temporary. I remember that even in 2009 there were people seriously arguing that we should expect interest rate hikes in few months. The history has proven them to be astonishingly wrong.
Thursday, January 30, 2014
The Limits of Turkey's Interest Rate Hike / Interest-Rates / Turkey
By: STRATFOR
Summary
With a dramatic hike in Turkey's overnight lending rate from 7.75 to 12.5 percent announced on Jan. 28, Turkish Central Bank Gov. Erdem Basci followed through on his earlier promise to use interest rates as a weapon to defend Turkey's currency, the lira. While the hike is a bolder-than-expected move designed to jolt investor interest, Basci is still, in effect, using a sword to fight off a barrage of artillery as a wrenching political crisis continues to erode investor confidence.
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Wednesday, January 29, 2014
Continuing Low Interest Rates Environment for Long term U.S. Treasury Bonds / Interest-Rates / US Bonds
By: John_Mauldin
Last week Greg Weldon made the case for rising interest rates on US treasuries. This week Lacy Hunt offers us the case for a continued low-interest-rate environment for long-term treasuries. This is one of the most fascinating tugs-of-war in the investment world today. I’ve made the argument that we are in a deflationary deleveraging world for quite some time to come, or at least until the velocity of money turns around. Lacy makes that point, too, and offers some insights into the velocity of money. This is a fascinating Outside the Box, and I won’t spoil it by stealing any more of Lacy’s thunder.