Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Thursday, February 28, 2019
Next Recession: Turning Zero Percent Interest Rates Into A 21% Yield / Interest-Rates / US Interest Rates
By: Dan_Amerman
If there is a new recession in the next few years, then it is highly likely that the Federal Reserve will take extreme measures in response, with the primary response being to swiftly knock short term interest rates back down to zero percent.
For many investors - the combination of recession, heavy-handed Fed interventions, and the return of zero percent interest rate policies (ZIRP) is likely to produce devastating results for their portfolios, and possibly their standard of living in retirement.
At the same time - some quite attractive profit opportunities will also exist, once we learn how to see them. This analysis explores one reasonably simple and practical alternative for turning zero percent interest rates into a 21% annual return.
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Monday, February 25, 2019
Fed Repo Man’s Valentine’s Day Present / Interest-Rates / US Interest Rates
By: Michael_Pento
The New York Federal Reserve recently sent out an early Valentine’s Day present to a certain group of individuals. However, this gift wasn’t to overleveraged American consumers; but rather to those who are employed repossessing one of those goodies they can’t afford. On February 12th the NY Fed made the announcement that a record number of consumers are falling behind on their car payments. There are now over 7 million car loans past due by at least 90 days as of Q4 2018, along with a record 89 million loans that are outstanding. For Subprime Auto borrowers with credit scores below 620, the delinquency rate spiked to over 16% and the number of subprime borrowers jumped to 20% of loans outstanding. The amount of overdue loans has spiked by 1.3 million since its previous high set in 2011, when the unemployment rate was at 9%.
Friday, February 22, 2019
US Auto Loans - Americans Missing Car Payments Is a Symptom of a Much Bigger Problem / Interest-Rates / US Debt
By: John_Mauldin
By Robert Ross Transportation is a big issue in most of the US.
It’s so big that for the majority of Americans having a car is a matter of survival. Most people can’t even go to work without a car.
That makes auto payments a high priority. And yet, the number of people who can’t make them is rising fast.
Last week, the Fed warned that auto delinquencies—or missed payments on auto loans—are on a steep rise.
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Friday, February 22, 2019
This Money-Destroying Policy Could Soon Become a Reality / Interest-Rates / Quantitative Easing
By: John_Mauldin
It was my first encounter with what I thought was economic insanity.
More than 10 years ago, I came across the ideas of economist Bill Mitchell of the University of Newcastle in New South Wales.
He was teaching what he called Modern Monetary Theory (MMT). I looked into it and quickly dismissed it as silly.
Actually printing money as an economic policy? Get serious.
Fast forward to today, the idea is adopted by new socialist-like movements in the US and abroad. It’s cited by politicians and mainstream media.
There’s a growing number of rationales for adopting MMT into our philosophical base.
Thursday, February 21, 2019
QE Forever: The Fed's Dramatic About-face / Interest-Rates / Quantitative Easing
By: Ellen_Brown
“Quantitative easing” was supposed to be an emergency measure, but the Federal Reserve is now taking a surprising new approach toward the policy. The Fed “eased” shrinkage in the money supply due to the 2008-09 credit crisis by pumping out trillions of dollars in new bank reserves. After the crisis, the presumption was the Fed would “normalize” conditions by sopping up the excess reserves through “quantitative tightening” (QT)—raising interest rates and selling the securities it had bought with new reserves back into the market.
Monday, February 18, 2019
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble / Interest-Rates / Corporate Bonds
By: John_Mauldin
By Robert Ross : “Housing prices in the US never go down.”
Just about everyone in America believed that in the mid-2000s.
A limited amount of buildable land and a growing population would keep housing demand strong.
So, house prices will continue to rise.
That was the thinking, anyway.
Even some of America’s brightest minds—like former Federal Reserve Chairman Alan Greenspan—jumped on the stable housing bandwagon.
Monday, February 18, 2019
Stacking The Next QE On Top Of A $4 Trillion Fed Floor / Interest-Rates / Quantitative Easing
By: Dan_Amerman
The Federal Reserve is currently communicating to the markets that it will likely pivot, and pause two strategies. The first pivot is to stop increasing interest rates. The second pivot is to stop unwinding the Fed balance sheet.
While the interest rate pause is getting the most attention - the balance sheet pause could be the most important one for investors over the coming years.
As explored herein, the impact of pausing the unwinding the balance sheet is to create a new floor at about $4 trillion in Federal Reserve assets. And if the business cycle has not been repealed and there is another recession - the Fed fully intends to go back to quantitative easing, potentially creating more trillions of dollars to be used for market interventions, and to stack another round of balance sheet expansion right on top of the previous round.
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Tuesday, February 12, 2019
The $12 Trillion Federal Debt Bombshell / Interest-Rates / US Debt
By: Michael_J_Kosares
“Who on earth, or in global finance, will buy this looming mountain of Treasuries?”
“Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection. I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counter-party signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan, former Fed chairman
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Friday, February 01, 2019
Fed Statement Commentary / Interest-Rates / US Interest Rates
By: Peter_Schiff
While some may have been confused by Fed Chairman Powell's circular statements in yesterday's press conference, the takeaway should be abundantly clear: the period of Fed tightening, is over. The Fed will now hold steady on interest rates, and when they move again, they are more likely to lower rates than to raise them. And while the Fed's program of balance sheet reductions is technically still underway, Powell made it clear that the program is no longer on "automatic pilot" and that the $50 billion per month of bond sales will likely diminish, and ultimately, conclude much earlier than anyone had predicted just a few weeks ago.
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Wednesday, January 30, 2019
Fed Fold Under Pressure, Telegraphs Looser Money Ahead / Interest-Rates / US Interest Rates
By: MoneyMetals
Two big questions have been front and center for Fed watchers in recent months...
The first is just how high rates could go before stimulus-addicted markets would falter. The second is whether our central bankers would bow to pressure once markets faltered and politicians began calling for the Fed to resume easy money policies.
Both questions now seem to have an answer.
They began to wonder in earnest if sky-high stock market valuations could be supported in an environment where Fed officials promised to keep rates moving even higher for the foreseeable future.
Monday, January 28, 2019
Will 35th Recession Bring A Swift Return To Zero Percent Interest Rates? / Interest-Rates / US Interest Rates
By: Dan_Amerman
Many people view the seven years of zero percent interest rates experienced in the United States between 2008 and 2015 as being safely in the past, with normal times having returned.
As explored in this analysis, so long as the business cycle of expansions and recessions has not been repealed - then we are highly likely to see a swift return to a potentially protracted bout of zero percent interest rates with the next major downturn in the economy.
Indeed, even the staff of the Federal Reserve itself expects more frequent episodes of zero percent interest rates in the future, and for those episodes to be on a more protracted basis.
This just may change everything when it comes to the financial plans of retirement and other long term investors. Zero percent interest rates don't just eviscerate the ability of retirees to earn interest income, but they also fundamentally change stock, bond, housing and precious metals prices, moving them to places that are outside of the historical averages.
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Sunday, January 27, 2019
Fed Doves Take Flight (But We Are Not in Kansas Anymore) / Interest-Rates / US Interest Rates
By: Gary_Tanashian
Wise guys trading Fed Funds futures see no more rate hikes in 2019, and a few even imagine a rate cut before year-end. Here are the projections for the next 3 meetings, showing an overwhelming view that the Fed will hold the current 225-250 target rate. Graphics: CME Group
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Tuesday, January 22, 2019
The US Interest Rate Hawks Surrender / Interest-Rates / US Interest Rates
By: Peter_Schiff
They say that there are no atheists in fox holes. Recently it has also become clear there are no monetary hawks in bear markets.
For much of the last decade many conservative market analysts have decried our reliance on monetary stimulus to prop up the economy and the stock market. But in the final months of 2018, in the face of the worst stock market declines in a decade, many of these supposedly pragmatic figures quickly abandoned their convictions. As the markets briefly crossed into bear territory, monetary hawks joined with the doves and President Trump in issuing a full-throated call for the Fed to cancel their planned rate hikes and balance sheet reductions. It appears as if the Fed got the message. Almost overnight, the tone from the Fed softened considerably, causing Wall Street to sound the "all clear."
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Friday, January 18, 2019
Debt, Division, Dysfunction, and the March to National Bankruptcy / Interest-Rates / US Debt
By: MoneyMetals
Never in our lifetimes has American politics been so marked by division and dysfunction.
The longest partial government shutdown in history occurred after the Democrat-controlled Congress wouldn’t compromise with President Trump on a border wall. The impasse is but one symptom of a deeper malady – one that threatens to wreak wider social and financial instability in the years ahead.
Put plainly, the pillars of the American system as we have known it are eroding.
No longer are we unified in support of the Constitution and a (more or less) free market economy. A growing faction within one party favors socialism and outright rejects foundational American principles such as free speech, gun rights, and limited government.
Wednesday, January 16, 2019
It’s Not Polite, but I’m Pretty Pissed at the Fed / Interest-Rates / US Federal Reserve Bank
By: John_Mauldin
This essay is going to insult a bunch of smart, maybe even brilliant, people. It is not polite nor is it politically correct. I will try to be better. But right now, I am pretty pissed.
Here’s the thing.
No serious scientist would run a two-variable experiment. By that I mean, you run an experiment with one variable to see what happens.
If you have two variables and something happens—either good or bad—you don’t know which variable caused it.
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Monday, January 14, 2019
Has the Fed Already Gone Too Far? / Interest-Rates / US Interest Rates
By: Michael_Pento
It is crucial for investors to understand that the Federal Reserve has not yet turned dovish and the Fed “Put” it not yet in place. Wall Street sometimes hears what it desperately needs, but that does not make it fact. While Jerome Powell has moved incrementally towards the dovish side of the ledger in the past few weeks, the Fed is still firmly in hawkish territory. If, however, Mr. Powell was actively reducing the Fed Funds Rate (FFR) and expanding the balance sheet, then we would have a dovish Fed. However, by just indicating that the FOMC might be close to finishing its rate hiking campaign, while still selling nearly $50 billion of bonds every month from its balance sheet, the Fed is still tightening monetary policy--and in a big way.
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Tuesday, January 08, 2019
Kendall and Hochberg: Interest Rates Win Again as Fed Follows Market / Interest-Rates / US Federal Reserve Bank
By: EWI
Most economists and financial analysts believe that central banks set interest rates.
For more than two decades, Elliott Wave International has tracked the relationship between interest rates set by the marketplace and interest rates set by the U.S. Federal Reserve and found that it's actually the other way around--the market leads, and the Fed follows.
The latest Federal Reserve rate decision on December 19 brought the usual breathless anticipation. Confusion reigned as the U.S. president as well as a former Fed board member publicly urged the U.S. central bank not to raise rates and many wondered if the Fed would "rescue" investors with a surprise decision to leave them unchanged. The Fed, however, did what it almost always does: it brought its rate in line with market rates.
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Monday, January 07, 2019
Half of Investment-Grade Bonds Are Just One Step from Junk Status / Interest-Rates / Corporate Bonds
By: Submissions
BY ROBERT ROSS :
The S&P fell 10%. It was its worst December since 1931.When the market drops, conventional investing wisdom says buy bonds. And this is what investors did.
Many have shifted money out of stocks into bonds. Much of that money has flowed into investment-grade corporate bonds.
These bonds are seen as some of the safest bonds investors can buy. The problem is that investment grade doesn’t mean what it used to.
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Wednesday, December 26, 2018
Federal Reserve – Conspiracy Or Not? / Interest-Rates / US Federal Reserve Bank
By: Kelsey_Williams
Conspiracy surrounding the Federal Reserve is a subject of much debate. A controversial topic, yes; one which stirs the imagination of some, fires the suspicion of others, and provokes the declamation of not too few detractors.
From G. Edward Griffin/The Creature From Jekyll Island…
Read full article... Read full article...“Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We’re talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called “The Jekyll Island Club.”
Wednesday, December 26, 2018
5 Potential Impacts of The LIBOR Expiration In 2021 / Interest-Rates / Mortgages
By: Submissions
In 2021, one of the most important financial tools will disappear. The London Interbank Offer Rate, or LIBOR, is the average estimated interest rate for loans between major London banks. In the decades since this number was created, it became a major element in determining short-term interest rates internationally. The interest on roughly $350 trillion contracts and loans rely on this number. Yet the UK government has ordered that the LIBOR be phased out by 2021. As a financier making long term plans, this can seem like a crisis waiting to happen. There are many possibilities for a future without the LIBOR, and not all of them are bad. Here are potential impacts of the LIBOR expiration in 2021.
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