Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Thursday, December 20, 2007
Bond Markets Train Wreck Imminent? / Interest-Rates / Global Financial System
By: Paul_Tustain
Next week may hold some unpleasant surprises – you may profit from an early warning.
YESTERDAY WE LEARNED that the British government's guarantee to bail out Northern Rock's creditors is worth a staggering £100 billion. That's £5,000 [$10,000] per British household. This week the European Central Bank made $500 billion available through money market operations. And only last week $110bn of new money was created by central bank loans with artificially low rates and reduced-quality security. This is money creation on an epic scale.
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Thursday, December 20, 2007
FTSE 100 Index Rallies as Interbank LIBOR Rates Continue to Tumble / Interest-Rates / UK Interest Rates
By: Nadeem_Walayat
FTSE 100 index rallied during the day, up more than 60 points at 6347 at 3pm GMT, as the 3 month sterling interbank LIBOR rate fell to 6.14% following continuing concerted central bank intervention that is starting to thaw the frozen credit markets.Read full article... Read full article...
Wednesday, December 19, 2007
Interbank Interest Rates Fall as Central Banks Succeed in Easing Liquidity Squeeze / Interest-Rates / Credit Crunch
By: Nadeem_Walayat
Concerted action by the worlds central banks is beginning to have an impact on the money market interbank rates. This resulted in a a sharp drop today in the Sterling LIBOR rate down from 6.38% last night to 6.20% today. Similar action by the US Fed and ECB has pushed Euro and US Dollar LIBOR rates significantly lower as the graph below demonstrates.Read full article... Read full article...
Tuesday, December 18, 2007
US Fed Emerges to Lead the World Out of the Subprime Crisis via the New Auction Facility / Interest-Rates / Credit Crunch
By: Axel_Merk
True leadership may have finally emerged to resolve the subprime crisis, although it was difficult to spot during a tumultuous week at the Federal Reserve (Fed). On Tuesday, December 11, 2007, the Fed cut interest rates by 0.25%. The Dow Jones index, disappointed in what was another effort by the Fed to claim to be both on top of inflation and the crisis in the credit markets, fell about 300 points. Around 6:30pm E.T. that night, ‘sources close to the Fed' suggested that banks would be able to borrow money from the Fed directly at rates set through an auction, rather than the discount rate set by the Fed. This was confirmed the next morning at around 8:13 am E.T., minutes before futures trading resumed, together with an announcement that foreign central banks, effective immediately, would be allowed to engage in currency swap agreements with the Fed. Read full article... Read full article...
Tuesday, December 18, 2007
Fed $40 Billion Auction Will be Liquidity Acid Test for Nervous Markets / Interest-Rates / Credit Crunch
By: John_Mauldin
The Fed is getting ready to auction of $40 billion in repos this week. The stock market acted is if this was a special gift stuffed into its Christmas stocking last week, rebounding after a serious drop in the market the day before. This week in Outside the Box, Dr. John Hussman tells us why the $40 billion is more smoke and mirrors than actual money. It seems they had $39 billion coming due this week anyway. And in a $12.7 trillion dollar banking system it may not make much difference.
This is not a long article, but it is important. You need to understand how the Fed works and when its actions make a difference. Hussman is very good at writing clear, easy-to-understand material on complex subjects.
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Saturday, December 15, 2007
Liquidity Crisis Would Be Reflected in High Interest Rates, That hasn't happened! / Interest-Rates / Liquidity Bubble
By: Adrian_Ash
"... The Dollar's holed up in a hotel shooting neat vodka, whatever its "people" are telling the press..."
IT'S A COLD & BITTER TRUTH that the world's investment markets rarely act as sober as Britney Spears in a new wig.
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Friday, December 14, 2007
Doomed to Fail - Central Banks Auctioning of Low Interest Rate Loans to holders of US Mortgaged-Backed Securities / Interest-Rates / Credit Crunch
By: Peter_Schiff
This week's announcement by the Fed that it will create a new mechanism to provide funding for credit challenged banks has been lauded by Wall Street as an innovative approach to solving the credit crisis. In truth, it is really just the same response the Fed has had for all problems great and small: crank up the printing presses, shower money on the problem, and hope that financial pain can be obscured by the balm of inflation. Both the Fed and Washington politicians are completely clueless regarding the ill effects of the plan, and are simply acting in desperation to keep a ticking time bomb from exploding before the next election.Read full article... Read full article...
Thursday, December 13, 2007
US Fed Term Auction Facilty to Drive Interbank Rates Lower / Interest-Rates / US Interest Rates
By: Paul_L_Kasriel
A lot of us were scratching our heads yesterday at 1:16 pm CST as to why the Fed did not reduce the spread between its discount rate and its federal funds rate target so as to alleviate pressures in the term Libor market that have developed since August (see Chart 1 below). Little did we know that the Fed had a little holiday stocking stuffer to give us today - Term Auction Facility.Read full article... Read full article...
Wednesday, December 12, 2007
Worlds Central Banks to the Rescue with $110 billions / Interest-Rates / Money Supply
By: Nadeem_Walayat
The Worlds Top 5 Central Banks in an unprecedented move joined forces at 2pm GMT to make $100 billions available to the retail banking market. The important point is that unlike previous liquidity boosts, the monies will be made available at favourable market rates which are much lower than the interbank rate.Read full article... Read full article...
Wednesday, December 12, 2007
Mortgage Bonds Crash in Value , Banking Sector Deception to Send Gold Soaring to $1000 / Interest-Rates / US Bonds
By: Jim_Willie_CB
An avalanche comes in 2008. Its wreckage will hit both the USEconomy and banking world. The greatest deception in the bank sector this year has been the misrepresentation of the mortgage debacle as a subprime problem. That is akin to calling an iceberg only a problem for what one can see, when 90% of its mass lies below water. Ice is lighter than water. Most mortgage bonds are like acidic stones weighing down bank and investor balance sheets. Wall Street and the USGovt con artists, using tools are fraud and distortion, prefer the public and investment community to think of the ‘Subprime Problem' as the source of distress.
On mortgage bonds, collateralized debt obligation derivatives, structured investment vehicles, all dominant in the news, reports constantly stress how the problem is traced to subprime mortgages to all those unworthy home loan borrowers who never should have been given such loans, even at higher mortgage rates. The systemic threat, both to the US banking system and USEconomy, has entered a new stage. The remedy addressed is sure to force the USDollar lower and the gold price higher, to occur in the next gear. Breakouts are coming which will seem to lose control, like what was seen in September and October.
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Wednesday, December 12, 2007
Merrill Lynch and Morgan Stanley Expect US Recession During 2008 / Interest-Rates / Money Supply
By: Gold_Investments
GoldGold was up $4.00 to $811.60 per ounce in New York yesterday and silver was up 3 cents to $14.67 per ounce. Subsequent to the Federal Reserve's 25 basis point interest rate cut gold fell in the less liquid New York Access market and erased the earlier gains. In volatile trade gold then fell as low as $796 but then rallied strongly and again erased the short term losses and in Asian and early European trading gold has been strong was at $807.50 at the today's London AM Fix. Gold was largely flat in pounds sterling and euros and at the London AM Fix gold was trading at £394.77 GBP (up from yesterday's London AM Fix at £393.79) and €549.21 EUR (up from yesterday's London AM Fix at €549.15). http://www.lbma.org.uk/statisti cs_current.htm Read full article... Read full article...
Tuesday, December 11, 2007
How Fund Managers and Investment Bankers Turn Toxic Waste Bonds Into Scam Profits / Interest-Rates / Scams
By: Paul_Tustain
"...If only I could make a thumping great profit before the year-end, says the fund manager to his investment banker, then my bonus would be secure..."
UNLESS YOU ARE well informed, you are going to pay for getting investment bankers and fund managers out of the very deep hole they have recently dumped us all in.
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Tuesday, December 11, 2007
Subprimes Hit Dervatives Shadow Banking System / Interest-Rates / Global Financial System
By: John_Mauldin
This week in Outside the Box we will look at Bill Gross of Pimco's latest essay, addressing the ever expanding economic repercussions of the poorly understood CDO/CLO market, the off balance sheet structured investment vehicles (SIVs) and the economic abyss Bernanke and Company are attempting to lead the market out of with neither light nor guide. Bill sits on the top of the largest bond firm in the world, so they have some very unique insights into what is happening. I always pay attention to what Bill says, and you should too.Read full article... Read full article...
Tuesday, December 11, 2007
The Final Interest Rate Cut of 2007 / Interest-Rates / Global Stock Markets
By: Regent_Markets
Housing news and interest rate decisions dominated headlines and market sentiment yet again last week. Its easy to forget that there were times when this wasn't the case.Read full article... Read full article...
Tuesday, December 11, 2007
US Interest Rate Cuts and Mortgage Bailout Will Avert US Recession in 2008 / Interest-Rates / US Economy
By: Nadeem_Walayat
The US Fed's reaction to date to the housing bust and US subprime mortgage credit crisis is by making deep cuts in US interest rates that today will see at least a further 0.25% cut bringing the rate down to 4.25%, off 1% from the 5.25% high just 3 months ago.
The US Fed is clearly in full blown panic mode, with the aim of the cuts to avert a potentially deep US recession.
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Monday, December 10, 2007
Nuclear Bond Implosion Ahead As Long-term Inflationary Expectations Rise / Interest-Rates / US Bonds
By: Alex_Wallenwein
The US Fed's measure for long term inflationary expectations may keep it from dropping rates much further, potentially setting off a 'nuclear' bond-price implosion. An only hours-old Bloomberg article details why "Chopper-Bernie" may have to ground his inflation-helicopter much earlier than anyone expects.In essence, an inflation indicator used by the Fed, and literally signed off on by Alan Greenspan, indicates that bond investors' long-term inflationary expectations are on the rise - and significantly so.
Bond investors have recently been lulled into a false sense of security by the alleged 'fact' that inflation remained so low.
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Monday, December 10, 2007
Bank of England Worried as Interbank Interest Rates Fail to Fall / Interest-Rates / UK Interest Rates
By: Nadeem_Walayat
The Bank of England responded last week with a panic interest rate cut to 5.5% on the latest signs of the UK housing market entering a bear market with the release of Halifax November House price data showing a sharp fall in house prices of 1.1%, and the liquidity squeeze that had raised the interbank rate substantially above the base rate.Read full article... Read full article...
Sunday, December 09, 2007
ECB Breaks US Dollar's Neck on Euro-zone Interest Rates Statements / Interest-Rates / Euro-Zone
By: Alex_Wallenwein
Yesterday, December 6, 2007, the ECB's Trichet announced that, while currently holding steady at 4.00 percent, he is willing to raise the euro's equivalent of the US federal funds rate in a heartbeat if euro-zone price inflation continues to rise next year.
EU zone inflation is widely expected to reach 2.5 percent next year, well above the ECB's tolerance level of around 2.00 percent.
Friday, December 07, 2007
Impending Global Financial Crisis As Credit Markets Grind to a Halt / Interest-Rates / Credit Crunch
By: Mike_Whitney
The wreckage in the housing market just keeps piling up. Sales of existing homes in October dipped 23.5% from last year. Prices on new homes dropped 13% year over year. Third quarter foreclosures skyrocketed to 635,000, a 94% increase over last October and an all-time high on the Misery-Meter. The real estate market is in free-fall and the real trouble hasn't even begun yet.
California, Nevada, Arizona and Florida are mired in a full-blown housing depression. Inventory is off-the-chart. Presently, there's a 10.8 month backlog and the numbers are steadily rising. If foreclosures continue at the current pace, by the end of 2008, there'll be a 14 month inventory. That means that every builder in the country could take off his tool-belt right now and stop working FOR MORE THAN A YEAR before the market would clear. Contractors would be filling out job-applications at Red Lobster or looking for an empty street-corner with a tin cup.
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Friday, December 07, 2007
Analysis of Interbank and Base Interest Rate Spread / Interest-Rates / UK Interest Rates
By: Nadeem_Walayat
The Bank of England cut UK interest rates on Thursday. One of the primary reasons for the cut was the credit crunch, and specifically its impact on the interbank money markets, which has seen the interbank rates soar since the credit crunch exploded on the scene during August 07, due to the fact there is an increased risk of default and lack of liquidity despite subsequent liberal amounts of liquidity released by the US Fed and the European Central bank. Therefore this article analyses the spread between the base interest rate as set by the Bank of England and the money markets 3 month inter-bank lending rate.Read full article... Read full article...