Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.Wednesday, July 13, 2011
U.S. Debt Ceiling Show Baloney / Interest-Rates / US Debt
The mainstream media are all a-twitter. Speaker of the House John Boehner has given up in the President's offer of a solution to the deficit crisis: a $4 trillion deficit reduction package. Oh, the horror! Oh, the pigheadedness of the Republicans!
Oh, the chicanery of the media. Maybe you have noticed the game that the media manipulators play: they announce a Big Government Deal in the headline, only to add later in the story these words: "over the next decade." This is the baloney factor.
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Wednesday, July 13, 2011
Could There Be QE3? / Interest-Rates / Quantitative Easing
The minutes of the June 21-22 FOMC meeting released today hinted at the possibility of another round of QE. To wit, "a few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run." A couple more employment reports of similar tone to the June one might cause the wording to change from a "few members" to "most members." But I do not think there will be a serious discussion of another round of QE until the fourth quarter of this year.
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Tuesday, July 12, 2011
Will Bernanke Hint At QE3? / Interest-Rates / Quantitative Easing
Chairman Bernanke presented his view about the economy last on June 7, 2011. He is scheduled to testify about the U.S. economy on July 13 and 14, 2011. On June 7, Chairman Bernanke, indicated that "U.S. economic growth so far this year looks to have been somewhat slower than expected." Incoming economic reports, in fact, do not present an improvement in business conditions since June 7.
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Monday, July 11, 2011
Defaulting on the Fed's Bonds / Interest-Rates / US Debt
Ron Paul recently made (another) splash among economic pundits with his suggestion that the Treasury simply cancel the $1.6 trillion in its debt held by the Federal Reserve. Many of Paul's longstanding critics seized on the proposal as reckless and said it was further evidence that Paul doesn't understand financial markets. However, Paul received unexpected praise from the progressive economist Dean Baker.
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Monday, July 11, 2011
European Debt Crisis Sees Government Bond Spreads Hit Record Highs / Interest-Rates / Global Debt Crisis
10-Year Government Bond Yields and Spreads vs. Germany
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Monday, July 11, 2011
The Euro Debt Crisis and You / Interest-Rates / Global Debt Crisis
Greece may seem a long way from Newport Beach, California. Well, it is. But, we live in the global village, or some other dim construction. In his June 16, 2011, edition of The Credit Strategist, Michael Lewitt explained "the interconnected nature of global financial markets render Europe's problems the world's problems.... [T]here is no longer any periphery."
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Sunday, July 10, 2011
Why QE2 Failed: The Money All Went Offshore / Interest-Rates / Quantitative Easing
On June 30, QE2 ended with a whimper. The Fed’s second round of “quantitative easing” involved $600 billion created with a computer keystroke for the purchase of long-term government bonds. But the government never actually got the money, which went straight into the reserve accounts of banks, where it still sits today. Worse, it went into the reserve accounts of FOREIGN banks, on which the Federal Reserve is now paying 0.25% interest.
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Sunday, July 10, 2011
On the Road to U.S. Government Debt Default, August 2nd Judgement Day / Interest-Rates / US Debt
A great default is behind us. The public is unaware of this. If you read this report, you will no longer be unaware of it.
The ease with which this default took place should serve as a warning: there will be additional, much larger defaults. Again, the public does not understand this. The main one will be Social Security. The program is now in the red: more money going out than comiomng in. But most people still cannot believe that the program really will go belly-up. That's why I produced a video on this.
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Saturday, July 09, 2011
Central Banks Monetary Policy Week in Review - 9 July 2011 / Interest-Rates / Central Banks
The past week in monetary policy saw interest rate decisions from 14 central banks around the world, of which 7 made changes in their monetary policy settings. Those that increased interest rates were: Sweden +25bps to 2.00%, China +25bps to 6.56%, the EU +25bps to 1.50%, and Denmark +25bps to 1.55%. While those that cut rates included Vietnam, which cut its OMO rate -100bps to 14.00%, and Ghana -50bps to 12.50%.
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Saturday, July 09, 2011
Real Bills Doctrine, You Have Never Ever Seen An Elephant Fly / Interest-Rates / Credit Crisis 2011
In the 19th century a saying, long since forgotten, was current on Lombard Street: "There is nothing easier in the world than the banker's profession - provided that he can tell a real bill and a mortgage apart."
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Friday, July 08, 2011
The China Debt $1.5 trillion, Is there a problem? / Interest-Rates / China Economy
It is a mystery. US analysts and rating agencies are increasingly worried about Chinese debt problem. But try and hunt as much as we do, we cant find a rationale for this.
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Friday, July 08, 2011
Is The Irish Debt Attractive? / Interest-Rates / Global Debt Crisis
According to a Bloomberg article, Sandor Steverink, the Europe’s best-performing sovereign debt fund manager over the last decade, asserted that when the Irish debt gets downgraded to junk, it is time to become a buyer. Steverink said he prefers Irish bonds to Portuguese ones as the country’s debt burden was caused by the banks and the country doesn’t have the structural problems of southern Europe’s economies. Above all, Ireland also has more potential to export its way out of trouble. We very much agree with such assessment and believe that once Ireland gets downgraded to junk, forced sellers will create a wonderful opportunity to buy.
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Thursday, July 07, 2011
The Psychology of Bond Market Investors / Interest-Rates / International Bond Market
Those who take issue with the outlook of Austrian economists in general, and Euro Pacific Capital in particular, have pointed to the persistence of low bond yields as proof that our philosophy does not hold water. We argue that as the United States takes on ever more debt and prints greater quantities of dollars, that buyers of our debt will demand higher rates of interest to compensate for greater risk.
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Thursday, July 07, 2011
World's High Debt Default Risk Countries / Interest-Rates / Global Debt Crisis
Top Risky countries in the world
■ Greek spreads peaked on 27th June – one day before the austerity measures set by the EU and IMF were approved by the Greek parliament. Spreads rallied following the decisive vote, but remain high with five year probability of restructuring at 80% and the markets expecting it to take around two years for the austerity measures to drive down the cost of borrowing.
Thursday, July 07, 2011
A Glimpse into America' a Money Printing Future 2015, Bernanke's QE17 / Interest-Rates / Quantitative Easing
Martin Hutchinson writes: At the end of last month, the U.S. Federal Reserve brought down the curtain on its $600 billion "quantitative easing" initiative, a U.S. Treasury-bond-purchase program that investors liked to refer to as "QE2."
Fed Chairman Ben S. Bernanke has indicated that he does not intend to carry out a follow-up "QE3" program.
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Thursday, July 07, 2011
U.S. States Slowly Slipping Into Bankruptcy and Beyond / Interest-Rates / US Debt
Everyone is focused on Europe and their debt problems. The peripheral countries (i.e. PIIGS) of Europe are now being asked to sell off national assets to keep the bankers fat and happy. What a system, huh? Meanwhile, several larger states in the United States (e.g., Illinois, California) are quietly slipping into bankruptcy and beyond. Will they be bailed out? The odds are strongly in favor of federal help for states in dire financial straights. After all, an election year is coming and who ever heard of a government not willing to give away other people's money/future purchasing power to get a few more votes for the incumbents?
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Thursday, July 07, 2011
Greece Massive Loss of Sovereignty, E.U. Seeks to Curb Rating Firms / Interest-Rates / Global Debt Crisis
Jean-Claude Junker, the man who says "When it becomes serious, you have to lie", apparently has had a sudden splash of honesty, stating Greek sovereignty to be massively limited.
Read full article... Read full article...Greece faces severe restrictions on its sovereignty and must privatize state assets on a scale similar to the sell off of East German firms in the 1990s after communism fell, Eurogroup chairman Jean-Claude Juncker said.
Wednesday, July 06, 2011
China Owns More Debt Than Thought: Did US Win Inflation War? / Interest-Rates / Global Debt Crisis
It has been brought to the attention of the Treasury that China may own more US Treasury debt than once thought. Rules put in place in 2009 limited would-be buyers of US Treasury debt to 35% of any given auction, but by using primary dealers (who have to buy US Treasuries at auction) as a proxy, the Chinese government has purchased more Treasuries than originally thought.
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Wednesday, July 06, 2011
How Commercial Paper Prices In Economic Recession / Interest-Rates / US Interest Rates
In what is becoming a multi part series on how various products price in recession tonight it is time to check out the commercial paper markets. Below are two charts (1) showing the last two recessions and how commercial paper rates performed and (2) commercial paper rates since Q2 2009. Both charts utilize non financial AA rated 30 and 90 day terms. The results were similar for financial paper as well.
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Wednesday, July 06, 2011
The Looming U.S. Debt Downgrade / Interest-Rates / US Debt
Tony Daltorio writes: An old saying, “Be careful what you wish for,” holds true in the investment world at times… such as now.
Over the past several days, the stock market enjoyed its best rally in months. This occurred on the back of news that the Greek crisis was resolved, at least temporarily.
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