Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Tuesday, February 28, 2012
A Primer on the Euro Breakup: Debt Default, Exit and Devaluation as the Optimal Solution / Interest-Rates / Eurozone Debt Crisis
By: John_Mauldin
It's one thing to say that peripheral eurozone countries are better off leaving the euro, but how, exactly? And how severe can we expect the consequences to be, not only for those nations but also for the entire eurozone – and for the rest of us, worldwide? To minimize fallout from the event(s), it would be helpful to have a solid foundation, based on an historical understanding of similar events, on which we could build a reasonable set of expectations.
In the following piece, Jonathan Tepper, my Endgamecoauthor, gives us the cornerstone of just such a foundation. With his London firm, Variant Perception, he has prepared a 53-page report with the very confident title "A Primer on the Euro Breakup: Default, Exit and Devaluation as the Optimal Solution."
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Monday, February 27, 2012
Short Term Interest Rates and Their Implications, Under the Radar / Interest-Rates / US Interest Rates
By: Tony_Caldaro
When a potental economic downturn is first sensed investors gradually start to shift into what is perceived as safe assets, namely Treasury bills, notes and bonds. As more and more investors pick up on this scenario a trend begins to appear. When economic data starts to confirm the downturn, the shift to safety turns into a long term trend and rates drop substantially. The opposite, of course, occurs during an economic upturn. When this occurs investors gradually shift out of the Treasury safe haven, and rates begin to rise. The initial shift, in both situations, is quite subtle, but measurable. We track these events using the 1 year T-bill.
Monday, February 27, 2012
To QE or Not to QE That is The Question / Interest-Rates / Quantitative Easing
By: Tony_Pallotta
The Fed does not like to surprise the markets. They telegraph policy changes well in advance. The coded language of Alan Greenspan has been replaced with plain english and press conferences under Bernanke. The Fed's monetary policy may be questionable but their strategy of being more transparent to the market has improved albeit far from perfect.
Monday, February 27, 2012
The Way Forward for Greece / Interest-Rates / Eurozone Debt Crisis
By: Submissions
Alasdair Macleod writes: Last Monday night, before the US markets opened after President’s Day, bailout terms for Greece were announced. The detail is secondary to assessing whether or not it will work, or whether only a little time has been bought. Theoretically the deal can work, but it is extremely unlikely that it will. Almost everyone knows or suspects this, but the survival of the European political system is at stake, and this systemic priority is more important than hard economic reality.
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Saturday, February 25, 2012
Our Depraved Future of Debt Slavery (Part II) / Interest-Rates / US Debt
By: Ashvin_Pandurangi
"Debt" has been used as a means of slavery throughout human history, in ancient societies dating as far back as thousands of years ago, such as those in Mesopotamia, Egypt, North/South America, etc. Debtors in these societies would be forced to relinquish their crops, land, freedom and even their wives and children to satisfy unpaid debts. Such extravagant periods of debt creation often culminated in the necessity for systemic debt forgiveness (or "Jubilee") by the decree of chiefs, emperors and kings to simply maintain some sense of social order [see Debt: The First 5000 years].
Thursday, February 23, 2012
Investing in Mortgages Makes Sense While Fed Supresses Yields / Interest-Rates / Mortgages
By: Bloomberg
PIMCO founder and co-CIO Bill Gross spoke with Bloomberg Television's Trish Regan, Lisa Murphy and Adam Johnson today about where to invest, the ETF PIMCO is launching next week and the state of the economy.
Gross said that investing in "mortgages make sense" as "yields are not going anywhere for the next two or three years."
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Thursday, February 23, 2012
Solar Cycles And Astro Trading / Interest-Rates / Learn to Trade
By: John_Hampson
There is one (and only one) strand of scientific theory that gives astro trading credibility (astro traders typically operate without reference to science or logical reasoning, and more on faith, which doesn’t sit well with me), namely that planetary alignment influences solar activity (which in turn influences the financial markets through sunspots and geomagnetism), so is there any evidence for this?
Thursday, February 23, 2012
Low Interest Rates, Economic Kill or Cure? / Interest-Rates / Inflation
By: Adrian_Ash
Hold still! This might sting a little...
"TREATING serious medical conditions often has unwanted side effects," said Charles Bean, deputy governor of the Bank of England and a doctor of economics, in a speech in Glasgow on Tuesday.
"But, unpleasant as those side effects sometimes are, treatment is invariably better than the alternative. So it is with the economic medicine of low interest rates and quantitative easing."
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Sunday, February 19, 2012
The Cancer of Debt and Deficits / Interest-Rates / US Debt
By: John_Mauldin
We are coming to the point in the United States when even the US government will no longer be able to borrow at very low long-term rates. That point is a few years off, and we have time to change paths; but as I have shown in previous letters, the longer we wait to get the deficit under control, the fewer choices we have and the more painful they are. NO country can run deficits the size we are currently running, along with unfunded deficits over four times the size of the economy and a growing overall debt burden, without consequences. At some point, investors in bonds will start wondering exactly what the process is by which they will be repaid. And what will the value of those future payments be?
Thursday, February 16, 2012
Investors Turn to TIPS as Warren Buffett Warns on Inflation / Interest-Rates / Inflation
By: Money_Morning
Don Miller writes:
Warren Buffett last week did more than warn investors on the dangers of low interest rates and inflation.
The Oracle of Omaha also had harsh words for traditional bonds.
In a Fortune article Buffett went so far as to say, "Right now bonds should come with a warning label."
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Wednesday, February 15, 2012
FOMC Meeting: Divided House about Additional Quantitative Easing / Interest-Rates / Quantitative Easing
By: Asha_Bangalore
The minutes of the FOMC meeting of January 24-25 presented a range of opinions about whether further monetary accommodation through asset purchases (QE3) is necessary. At one end of the spectrum, “a few members observed that, in their judgment, current and prospective economic conditions – including elevated unemployment and inflation at or below the Committee’s objective – could initiate the purchases of additional securities before long.” A more qualified position was held by other members who indicated that “such policy action would become necessary if the economy lost momentum or inflation seemed likely to remain below is mandate consistent rate of 2 percent in the medium run.” In stark contrast to these two opinions that suggest an inclination toward additional asset purchases or QE3, on member viewed maintaining the current extent of monetary accommodation more than the near term as “inappropriate.”
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Wednesday, February 15, 2012
The Lesson of "Half-Hearted" QE Money Printing / Interest-Rates / Quantitative Easing
By: Adrian_Ash
Take 40 trillion Yen, add another 22 trillion, and you still aren't doing enough!
SO HOW MUCH quantitative easing is enough quantitative easing?
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Monday, February 13, 2012
What Does the Bank of England Think It's Doing? / Interest-Rates / Quantitative Easing
By: Adrian_Ash
Quantitative easing has not worked as advertised so far. Why push ahead with more...?
"YOU'VE lost control – Bank of England takes over," says the Bank of England's cute little game for school-kids if you let the hot-air balloon you control crash into the ground, rather than happily floating it around the 2.0% annual inflation target.
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Monday, February 13, 2012
Bullish Set-up for Treasury Bonds TLT ETF / Interest-Rates / US Bonds
By: Mike_Paulenoff
My near- and intermediate-term work indicate that the iShares Barclays 20 Year Treasury ETF (TLT) established a significant corrective low at 114.62 on Feb 9 and that since then the price structure is doing the work to create a powerfully bullish technical set-up that should propel it towards 120 in a hurry.
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Thursday, February 09, 2012
The Fed's Quasi-Fiscal Policies / Interest-Rates / Quantitative Easing
By: David_Howden
The policies that the Fed embarked on in late 2007 are a sharp departure from the old way of performing monetary policy. In fact, it is difficult to state that the Fed is any longer in the business of traditional monetary policy — understood in the United States as aiming for low inflation and smoothed output volatility. A new breed of monetary policies better referred to as "quasi-fiscal" policies has become the norm.
Wednesday, February 08, 2012
The Deception of 0% Interest Rates, High Costs and Capital Destruction / Interest-Rates / US Interest Rates
By: Jim_Willie_CB
The interminable extension by the US Federal Reserve on the 0% rate into 2014 represents history in the making. It is the adoption of pure heresy in monetary policy, making it mainstream. Worse, it forces foreign central banks to adopt the same destructive policy in the Competing Currency War. Once upon a time, the highest priests from the central bank would admit in a guiding tone that accommodation on interest rates must be temporary. Nowadays it is engrained in the market mindset and permanent in monetary policy. The chronic 0% means the entire financial and monetary system is totally irreparably broken. The old pendulum where the tilt was toward bonds during recession, then toward stocks during recovery, that is all gone, shattered by the endless financial crisis. One must incorporate a new thinking, that the entire financial and monetary system is totally irreparably broken, then adapt in fierce defense. Larry Fink of Blackrock private equity firm made news today by suggesting that 0% bond yields offer no return on investment. How true! He did not offer any accurate reflection of reality that the financial structures are broken, nor that all attempts at remedy were flimsy and misdirected. He gave the ALL IN signal for buying stocks in 2012, thus putting on the risk trade. The immediate ancillary signal is to back up the truck and load up with GOLD also.
Wednesday, February 08, 2012
Bell Rings for U.S. Treasury Bond Bubble / Interest-Rates / US Bonds
By: Michael_Pento
They always tell you no one rings a bell when a market top or bottom is reached. But a bell is now ringing for the end of the thirty-year bull market in U.S. debt. And ironically, the bell ringer is our very own U.S. Treasury!Read full article... Read full article...
Wednesday, February 08, 2012
Has Zero Interest Rate Policy Held Back Economic Recovery? / Interest-Rates / US Interest Rates
By: Asha_Bangalore
The Fed instituted the zero-interest-rate policy (ZIRP) in December 2008 in response to the financial crisis. The ZIRP policy has been extended to late-2014 following the January 24-25 FOMC meeting, which will make it a six-year project. The current ZIRP policy of the Fed has its critics and advocates; Bill Gross presents arguments in today's Financial Times article for putting an end to the ZIRP policy because it is the root cause of economic woes today. His focus is on the absence of incentives for banks to find suitable projects to finance if they can park money at the Fed risk free for 25bps. He also adds that investors are most likely to shun Treasury securities as "there are multiples of downside price risk compared to appreciation."
Tuesday, February 07, 2012
The Fed Resumes Printing Money to Monetize U.S. Government Debt / Interest-Rates / Quantitative Easing
By: Casey_Research
Bud Conrad, Casey Research writes: The Federal Reserve recently announced important policy changes after its Federal Open Market Committee (FOMC) meeting. Here are the three most important takeaways, in its own words:
1.The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
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Tuesday, February 07, 2012
Ben Bernanke and QE3 / Interest-Rates / Quantitative Easing
By: Michael_S_Rozeff
Ben, if you and the other members of the FRB are thinking of the factors that I shall mention, then you are likely not to do QE3 any time soon. If not, then, on your own grounds of economic thought, I believe that you are making a mistake.
My general argument is that the risks of QE3 outweigh the prospective gains, on your grounds, not mine. (My preference is no central bank and free banking and/or privately produced money and credit, but I am laying that aside in this article.)
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