Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Monday, December 26, 2022
US Debt Jubilee / Interest-Rates / US Debt
By: Richard_Mills
A cross-the-board ‘Debt Jubilee’ might sound radical, but a reading of history shows that retiring debt can actually make a country’s economy, and its indebted citizenry, all the better for it. There is even a relatively recent example. In 2000, U2 front man Bono launched a campaign to provide debt relief to developing countries. The Jubilee 2000 coalition managed to get the G8 to agree to write off $100 billion in debts that developing countries owed to developed nations.
The term ‘Jubilee’ comes from the Old Testament. The book of Deuteronomy refers to a sabbath year during which any slaves would be freed, and everyone would be allowed to return to their family farms and live off the land. During the Jubilee, all debt obligations would be forgiven — such as land or crops that debtors had pledged to creditors.
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Saturday, December 24, 2022
Why the Fed Intertest Rates Pivot will Happen Faster than People Think / Interest-Rates / US Interest Rates
By: Richard_Mills
Most market participants see the Fed’s tightening policy as similar to what Paul Volcker’s Fed did in the late 1970s, when double-digit inflation necessitated a cycle of rate hikes that brought the federal funds rate to 20%. Volcker succeeded in taming inflation but the price was the 1982 recession, considered one of the longest and worst in economic history.
There is one crucial difference between 1982 and 2022, and that is the debt. According to the FRED chart below, the US debt to GDP ratio in 1982 was around 35%. Today it is more than three times higher, at 120%.
This severely limits how much and how quickly the Fed can raise interest rates, due to the amount of interest that the federal government must pay on its debt.
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Thursday, November 24, 2022
Why INTEREST RATE HIKES Are INFLATIONARY! / Interest-Rates / Inflation
By: Nadeem_Walayat
Unfortunately I will have to leave this mostly for next time. But basically INTEREST RATE HIKES to bring INFLATION DOWN! Is NOT going to work because INTEREST RATES DO NOT CONTROL the RATE of INFLATION. So that which academics have built their whole careers on is BS! All I hear is Volcker raised rates that brought inflation down and so rinse and repeat, was it Interest rates that killed the Inflation of the 1970's? Are you sure your not lapping up the propaganda which is ECONOMICs perpetuated by the propaganda arms of Governments called central banks who's primary remit is to put up a smoke screen of misinformation so as to allow governments, to get away with printing money!
As I have voiced for well over a decade, Inflation is a function of governments PRINTING MONEY, of which QE is part of the equation i.e print money to monetize government debt, which despite all of the noise continues to this very day! Governments printing money on an epic scale for which the smoking gun is the Governments deficit spending, the US Federal Government is spending $1.4 trillion more than it earns in revenue that is PRINTING MONEY! For the UK it's about £120 billion,
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Thursday, November 24, 2022
Are I-Bonds Predicting a drop in Inflation ? / Interest-Rates / Inflation
By: Nadeem_Walayat
A patron commented - Interesting take on inflation: the US Treasury I-bonds (which one can invest $10k each year) will pay an annualized interest from November 1, 2022, through April 2023 of 6.89%, down from the 9.62% rate offered since May 2022. Probably an indicator that the inflation stats that are forthcoming will show we’ve peaked. https://treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/
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Monday, November 07, 2022
Powell May Be Planning a Post-Election Fed Pivot / Interest-Rates / US Interest Rates
By: MoneyMetals
The U.S. Dollar Index (DXY) took a dive last Friday following a middling jobs report. Could the move be the start of a bigger breakdown?
The DXY, a measure of the dollar’s relative strength versus a basket of foreign currencies, peaked in late September. Since then it has fallen into a sideways trading range, failing to make new highs despite another jumbo rate hike by the Federal Reserve last week.
Currency traders may be looking ahead – specifically to the likelihood of a U.S. economic downturn in 2023. The potential of another housing-led Great Financial Crisis also looms.
Sunday, November 06, 2022
The 78 Year Interest Rate Cycle - Why Investors in U.S. Treasuries Face Major Risk / Interest-Rates / US Interest Rates
By: EWI
Rising rates will be "disastrous" for governments, other debtors and creditors
The market for U.S. Treasuries is the biggest bond market in the world, and it appears that potentially big trouble may be afoot.
Earlier this month, none other than the U.S. Treasury Secretary herself (Janet Yellen) acknowledged ...
... "a loss of adequate liquidity in the [U.S. government debt] market."
Then, in a statement last week, Bank of America strategists expressed concerns about ...
... "large scale forced selling [of U.S. Treasuries]."
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Thursday, November 03, 2022
Fed Hawkish Interest Rate Pivot / Interest-Rates / US Interest Rates
By: Michael_Pento
This latest bear-market bounce was predicated on good seasonality, the hopes for a typical mid-term election boost, and the rumors of a Fed pivot. Wall Street always finds a narrative for rallies in a bear market. But the negative economic and liquidity cycles remain unchanged: The Fed is hiking rates into a recession. Powell may have done his last 75bp rate hike on November 2nd. But another 50bp hike is likely coming in December, and then the regular 25bp variety is coming in February. Meanwhile, $95 billion per month of Quantitative Tightening is rapidly destroying the money supply.
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Wednesday, November 02, 2022
SMASHED Bond Markets Brewing Opportunity / Interest-Rates / International Bond Market
By: Nadeem_Walayat
The consensus script is that when stocks fall bonds go up, instead 2022 saw that consensus view blown apart as the below chart illustrates. In fact bonds have NEVER under performed stocks during a downturn, not even during the raging inflation of the 1970's!
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Friday, October 28, 2022
FED Balance Sheet QE4Ever / Interest-Rates / Quantitative Easing
By: Nadeem_Walayat
Not to forget the inflation mega-trend courtesy of rampant central bank money printing to monetize government debt coupled with the fake inflation indices where up until recently the Fed had succeeded in hoodwinking the masses that US inflation was just 1%. Instead at that time I warned it was more like 6%! Now it's more like 14%. Anyway the money printing binge now totals $8.8 trillion, up from $4 trillion at the start of 2020 and down from a a peak of $9.62 trillion in the so called Taper. We saw how the taper of 2019 went which at the time I warned would eventually resolve in the Fed Balance sheet DOUBLING. of course I was not expecting it to happen the very NEXT YEAR in 2020!
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Wednesday, October 26, 2022
TIPS BONDS FAKE INFLATION PROTECTION! / Interest-Rates / Inflation
By: Nadeem_Walayat
How to protect one self form INFLATION! Well what the investment industry sold to their clients were Inflation Protected Bond funds! The sales pitch went that when Inflation soars and regular bonds fall don't worry you are protected so given that inflation has taken off like a rocket have these bond funds delivered on their sales pitch?
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Wednesday, October 26, 2022
When Will the Fed Throw in the Towel on Rate Hikes? / Interest-Rates / US Interest Rates
By: MoneyMetals
The Federal Reserve finally stopped referring to inflation as “transitory” earlier this year and got serious about trying to control the painful rise in prices it has caused. Officials have jacked the Fed funds rate up by 3% since March.
Thus far they have been willing to inflict pain upon financial markets. The S&P 500 lost roughly 20% of its value since the end of March.
The aggressive tightening has also pushed the Federal Reserve note “dollar” higher relative to other major currencies.
Sunday, October 23, 2022
US interest Rates and Inflation / Interest-Rates / US Interest Rates
By: Nadeem_Walayat
US market interest rates LEAD the inflation rate. even more so than that which the below graph implies as there is a couple of weeks delay in release of inflation data. And then there is the smoke and mirrors inflation game that the Fed plays i.e. core inflation vs CPI, core is CPI less food and energy because obviously people can survive without food and energy so are excluded so that the Fed gets a more manageable inflation number so as to make their job easier than if they had to cope with a truer inflation rate.
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Monday, September 26, 2022
Is Powell Bent on Wrecking the US Economy? / Interest-Rates / US Federal Reserve Bank
By: MoneyMetals
Federal Reserve chairman Jerome Powell has taken a turn to the dark side.
After years of pleasing everyone on Wall Street and in Washington, D.C. with ultra-loose monetary policy, Powell has, for now, decided to recast himself as the villain. He now seems intent on crashing markets, killing jobs, and driving the economy into a deep recession in the name of fighting the inflation he helped unleash.
Saturday, August 20, 2022
Mixed Messaging from the Fed Causing Confusion in Markets / Interest-Rates / US Interest Rates
By: MoneyMetals
Precious metals markets are giving up ground this week as investors react to the latest musings from the Federal Reserve.
On Wednesday, the Fed released the minutes from its latest policy meeting. Officials acknowledged some of the warning signs of a weakening economy. That suggests they are likely to scale back future rate increases rather than implement additional 75 basis-point hikes.
But policymakers also admitted that inflation is still running uncomfortably high and seem poised to continue tightening to some extent.
Mixed messaging from the Fed caused confusion among investors. Some interpreted the Fed's comments as hawkish while others saw them as more dovish than expected. Perhaps central bankers themselves are confused and don't really know what they should be doing next.
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Thursday, August 04, 2022
Should We Be Prepared For An Aggressive U.S. Fed In The Future? / Interest-Rates / US Interest Rates
By: Chris_Vermeulen
Traders expect the U.S. Fed to soften as Chairman Powell suggested they have reached a neutral rate with the last rate increase. The US stock markets started an upward trend after the last 75bp rate increase – expecting the U.S. Fed to move toward a more data-driven rate adjustment.
My research suggests the U.S. Federal Reserve has a much more difficult battle ahead related to inflation, global market concerns, and underlying global monetary function. Simply put, global central banks have printed too much money over the past 7+ years, and the eventual unwinding of this excess capital may take aggressive controls to tame.
Wednesday, August 03, 2022
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ / Interest-Rates / US Interest Rates
By: MoneyMetals
With last week’s second 75 basis-point rate hike, the Federal Reserve now claims it has achieved a “neutral” monetary policy stance. That would mean, in theory, that interest rates are neither stimulating nor restraining the economy.
"Now that we're at neutral, as the process goes on, at some point, it will be appropriate to slow down,” Fed Chairman Jerome Powell said.
Powell was effectively telling markets he intends to pivot away from inflation fighting.
Yet inflation, even when measured by the Fed's own preferred gauge, continues to run hot.
Saturday, July 09, 2022
Central Banks QT SCAM - Bank of England Set to DELETE UK Treasury Bonds off it's Balance Sheet / Interest-Rates / Quantitative Easing
By: Nadeem_Walayat
Just as the Bank of England handed most of the interest that the UK treasury pays on the Gilts it holds back to the TREASURY
So what do you think the Bank of England is going to do as maturing bonds are removed from it's balance sheet, I will tell you whats going to happnen, they are going to subvert QT so that most of the money the treasury pays the Bank of England on mautirng bonds is going to find it's way back to Treasury in a technical excercise of deleting maturing bonds off central banks balance sheet.
The only question market is will the clueless mainstream financial press be able to cotton on to the inflationary Weimer Republic money printing scam that the Bank of England and Treasury will be perpertruating or not?
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Friday, July 08, 2022
The Fed Is Afraid of Inflation and Tightens Its Hawkish Stance / Interest-Rates / US Interest Rates
By: Arkadiusz_Sieron
The Fed gives no illusions: it will maintain its hawkish stance. Meanwhile, gold plunged decisively below $1,800, which has bearish implications.Yesterday (July 6, 2022), the FOMC published the minutes from its last meeting, held in mid-June. Although the publication reveals no major surprises about US monetary policy, it shows rising worries within the Fed and also strengthens its hawkish rhetoric.
Why? First, the Committee’s members acknowledged that “the near-term inflation outlook had deteriorated since the time of the May meeting.” They also agreed that risks to inflation were skewed to the upside and that persistently high inflation could de-anchor inflation expectations:
Many participants judged that a significant risk now facing the Committee was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted. On this matter, participants stressed that appropriate firming of monetary policy, together with clear and effective communication, would be essential in restoring price stability.
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Sunday, July 03, 2022
Is the US Yield Curve Inversion Broken? / Interest-Rates / US Bonds
By: Nadeem_Walayat
The US has experienced 6 recessions over the past 40 years each of which were accompanied by an inversion of the 2 year and 10 year treasury bond yields an average of 18 months BEFORE the recession so whilst US yield curve inversions have proven to be a useful indicator in the past, though this time around inflation has been warning of a recession for a good 6 months before the US yield curve recently tentatively inverted sending MSM into a spin. Still the below chart does demonstrate that a yield curve inversion was imminent given that the interest rates have hit the down sloping trendline at which point yield curves tend to invert usually in advance of a recession which tends to typically follow 12 to 18 months after inversion, in terms of stocks and housing this implies downwards price pressure AHEAD of the recession rather than WITH the recession. But again all of the inversions of the past 20 years were during periods of LOW inflation.
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Monday, June 27, 2022
Have US Bonds Bottomed? / Interest-Rates / US Bonds
By: Nadeem_Walayat
A patron asked if US bonds have bottomed / are cheap to buy now that inflation is 'peaking'.
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