Analysis Topic: Interest Rates and the Bond Market

The analysis published under this topic are as follows.

Thursday, March 24, 2011

Central Bank Fractional Reserve Banking Authorized Fraud Explained / Interest-Rates / Central Banks

By: Mike_Shedlock

Keith Weiner at the Daily Capitalist purports to explain the Fractional Reserve Banking: The Real Story

Weiner makes a case that the problem with fractional reserve lending is one of "duration mismatch". If you don't understand the term "duration mismatch", please don't stop reading. I provide an easy to understand example below.

Wednesday, March 23, 2011

Fed Policy: Underwrite Mortgages to Underwrite the Treasury / Interest-Rates / US Debt

By: Dr_Jeff_Lewis

In a little known program to which few have been paying attention, the US Treasury is attempting to unwind positions it inherited from a very expensive bailout of government-sponsored entities Fannie Mae and Freddie Mac. 

Monday, March 21, 2011

Municipal Bonds Ignorance and Opportunity / Interest-Rates / US Bonds

By: Fred_Sheehan

Following are some of my remarks prepared for Allen & Company's Fifteenth Annual Arizona Conference. The discussion, "Munis and the Euro: Crises or Opportunities?", took place on March 8, 2011. The moderator was Senator Bill Bradley, Allen & Co., New York. Participants were Dick Ravitch, Ravitch, Rice & Company, New York; David Kotok, Cumberland Advisors, Sarasota, Florida; Uri Dadash, The Carnegie Endowment, Washington, DC.; and Frederick J. Sheehan.

Sunday, March 20, 2011

What Happens When We Come to the End of QE2? / Interest-Rates / Quantitative Easing

By: John_Mauldin

What happens when the Fed is finished with QE2? I have been letting that filter into my thinking lately as I look at the economic landscape and the data we have seen the past few weeks. Correlation is not causation, as I often say, but all we can do is look back at what happened last time and speculate about the future. A very dangerous occupation, but your fearless analyst will plunge on ahead into the jungle of a very hazy future. You come with me at your own risk!

Sunday, March 20, 2011

Fed Policies of U.S. Dollar Destructionism / Interest-Rates / US Dollar

By: LewRockwell

James Grant writes: This testimony was delivered before the Ron Paul monetary subcommittee on March 16, 2011.

"What Should the Federal Reserve Do Next?" was the headline over the roundup of expert monetary opinion on the op-ed page of the Sept. 9 Wall Street Journal. The experts couldn't seem to agree. Buy Treasurys by the boatload, one counseled. Do nothing of the sort, urged another. Hew fast to the Taylor Rule, John B. Taylor, himself the author of the very rule, modestly proposed (i.e., fix the federal funds rate at one-and-a-half times the inflation rate plus one-half times the shortfall of GDP from potential, plus one). The half-dozen authorities shared not much common ground except to ignore the principles on which the dollar was defined in 1792 and those on which the Federal Reserve was enacted in 1913. The burden of this essay is that they thereby missed the point.

Friday, March 18, 2011

US Treasury Yield BubbleomiX Forecast: 10 Year Bonds Still Targeting 3% / Interest-Rates / US Bonds

By: Andrew_Butter

Three months ago I wrote a piece saying that the 10-Year was heading for 3% by 20th February. http://www.marketoracle.co.uk/Article25128.html

 I got a note from someone who is right more often than me saying he had it pegged at 3.8% . I’ll call that a draw although I noticed I made a mistake on the timing, what I really meant was April 20th; I’ll put that down to dyslexia.

Friday, March 18, 2011

U.S. Monetary Policy that Encourages Malinvestment / Interest-Rates / Quantitative Easing

By: Richard_Daughty

Thorsten Polleit, of the Frankfurt School of Finance & Management, penned an article in The Free Market newsletter of the Ludwig von Mises Institute titled "The Many Names for Money Creation."

It starts off almost humorous, reading more like an interesting, mood-lightening sidebar to a banner article titled "We're Freaking Doomed (WFD)!" as he notes that the dire economic conditions are such that "euphemisms have risen to great prominence. This holds true in particular for monetary policy experts, who are at great pains to advertise a variety of policy measures as being in the interest of the greater good, because they are supposed to 'fight' the credit crisis."

Friday, March 18, 2011

Japan Quake Shakes U.S. Treasury Bond Market Get Ready for Financial Meltdown / Interest-Rates / US Bonds

By: LEAP

Beyond its tragic human consequences (1), the terrible disaster that has just hit Japan weakens the shaky US Treasury Bond market a little more. In the GEAB No. 52, our team had already explained how the sequence of Arab revolutions, this fall of the “petro-dollar” wall (2), would translate during 2011 into the cessation of the massive purchases of US Treasury Bonds by the Gulf States. In this issue, we anticipate that the sudden shock experienced by the Japanese economy will lead not only to the halt in US T-Bond purchases by Japan, but it will force the authorities in Tokyo to make substantial sales of a significant portion of their US Treasury Bond reserves to finance the enormous cost of stabilization, reconstruction and revival of the Japanese economy (3).

Thursday, March 17, 2011

Japanese Fallout May Hit U.S. Treasury Bonds / Interest-Rates / US Bonds

By: John_Browne

Japan is facing two meltdowns in the wake of its devastating earthquake. The first, and more critical, is the meltdown at the Fukushima I Nuclear Plant, 150 miles north of Tokyo. Surely, this is the greater near-term threat. But long-term, another threat looms, having to do with the Japanese government's response to the former.

Thursday, March 17, 2011

Monetary Lunatics, Is QE3 Ahead? / Interest-Rates / Quantitative Easing

By: LewRockwell

Austrian School economists have often explained the business cycle using the metaphor of liquor or drugs. The expansion of paper money and credit gives a sense of exuberance, an economic high that leads to excessive risk-taking and ballooning production. But it can’t be sustained. There is a morning after.

Thursday, March 17, 2011

Japan Natural Disaster to be Fought with a Tsunami of Credit / Interest-Rates / Quantitative Easing

By: Dr_Jeff_Lewis

Following the worst natural disaster in decades, the Japanese central bank will begin an instant round of easing to boost liquidity as Japan continues to recover after disaster.  The country, wrecked by an awful 9.0 earthquake and following tsunami, along with nuclear reactor exposure, will now cope in perhaps the worst way with economic fallout: 15 trillion yen in bond-buying, worth roughly $183 billion.

Wednesday, March 16, 2011

Options Trading Lesson on Triple Calendar Spreads / Interest-Rates / Options & Warrants

By: J_W_Jones

One of the characteristics of option trades that is particularly vexing to the new trader is the almost infinite variation in which individual options can be combined to produce a seemingly infinite array of choices. These combinations of the various individual options are more than a theoretical exercise; each individual combination often produces a unique Profit & Loss curve.

Wednesday, March 16, 2011

E.U. Politicians Seek to Unload PIIGS Bonds / Interest-Rates / Global Debt Crisis

By: Claus_Vogt

Since last Friday all eyes have been geared toward the catastrophe in Japan. That’s indeed understandable. However, there has been another important development with far-reaching implications that is worth discussing today …

While the media was totally focused on the Japanese disaster, German Chancellor Merkel and her European brethren insidiously decided to make a major change within the European Financial Stability Facility (EFSF), the EU’s euro rescue fund …

Tuesday, March 15, 2011

U.S. Government Evermore Reliant on Foreign Investors to Finance Debt / Interest-Rates / US Bonds

By: Kieran_Osborne

Despite the Fed recently surpassing China as the largest owner of U.S. government debt, the U.S. remains heavily reliant on foreigners to fund the government’s ongoing fiscal largess. Geithner’s Treasury Department has firmly focused new issues at the mid to longer end of the yield curve (since Geithner assumed office, the average length of marketable Treasury debt held publicly has increased by nearly one year). Despite the Treasury taking advantage of the ultra-low interest rate and funding environment, there are substantial refinancing issues over the near term; moreover, many of these maturing issues are foreign owned. Should sovereign fiscal concerns spread to the U.S., in concert with the evermore attractive interest rates offered internationally, refinancing the U.S. debt could become increasingly difficult if foreign investors turn their backs.

Tuesday, March 15, 2011

Why U.S. Treasury Bonds Are No Longer the Interest Rate Market Bellwether / Interest-Rates / US Bonds

By: Money_Morning

Shah Gilani writes: Divining the direction of interest rates used to be a lot easier.

With the Federal Funds Rate, policymakers at the U.S. Federal Reserve would indicate precisely what they wanted the overnight lending rate between big banks to be. And the prices of U.S. Treasury securities of all maturities fell in line like obedient soldiers.

Tuesday, March 15, 2011

U.S. Interest Rates Are On The Launch Pad / Interest-Rates / Stock Markets 2011

By: Jack_Steiman

A few months ago, the chorus sung by the recovery cheerleaders reached a crescendo when expanding consumer credit statistics and surging US trade deficits provided them with "evidence" of an economic rebound. In declaring victory, they overlooked the very nucleus of this past crisis: namely, the enormous debt levels and bubbling inflation that created fragile asset bubbles. If they had recognized the original problem, they would have remained silent. In reality, only a reduction in US debt levels or increase in the value of the dollar would have signaled a budding recovery; but, thanks to the Federal Reserve and Obama Administration, there is virtually no way those results will ever be seen.

Tuesday, March 15, 2011

Fed FOMC Interest Rate Meeting March 15th Preview / Interest-Rates / US Interest Rates

By: Asha_Bangalore

The March 15 FOMC meeting is nearly certain to end with no change in the Fed's current monetary policy stance with an indication that it would continue the second round of quantitative easing.  Market participants are keeping a close eye on the policy statement to assess if there is a shift in the Fed's view.  A change in the Fed's outlook, if any, will be visible if the phrase "exceptionally low levels for the federal funds rate for an extended period" is modified.  Differences of opinion within the policy making committee about the quantitative easing program, involving a purchase of $600 billion Treasury securities, suggest a contentious debate.  In addition, an exit plan should be part of the agenda. 

Tuesday, March 15, 2011

RIP Shadow Banking System, Long Live QEx / Interest-Rates / Quantitative Easing

By: Gordon_T_Long

We have unwittingly become trapped in the snarled net of years of bad Public Policy. Like corporations that look no further than this quarter's results, our politicos never stop campaigning to start the tough task of ruling responsibly. A winning election simply represents 'rewards' and 'spoils' to all before quickly resuming the next campaign. 

Monday, March 14, 2011

The Best Opportunity for Safe, Tax-Free Income You'll See in 2011 / Interest-Rates / US Interest Rates

By: DailyWealth

Dr. David Eifrig writes: If you can ignore one of the media's biggest sources of hype, you'll see there's an amazing opportunity for income investors right now...

But if you're interested in collecting this income, I encourage you to act soon. It won't be available for long.

Monday, March 14, 2011

Three Flawed Fed Exit Options / Interest-Rates / Central Banks

By: Robert_Murphy

Whether giving public lectures or teaching at the Mises Academy, I'm often asked whether Bernanke will be able to "pull this off." Specifically, can the Fed gracefully exit from the huge hole it has dug for itself?

Unfortunately my answer is no. In the present article I'll go over three possible exit options, and explain the flaws in each.