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Market Oracle FREE Newsletter

Analysis Topic: Interest Rates and the Bond Market

The analysis published under this topic are as follows.

Interest-Rates

Thursday, May 02, 2019

The Fed Can’t Ease Interest Rates Until Stocks Collapse… / Interest-Rates / US Interest Rates

By: Graham_Summers

Yesterday’s Fed meeting had one clear message:

The Fed needs a reason to cut rates.

The Fed has obviously laid the ground work for a rate cut by hinting at easing… but with the “official” GDP numbers at 3.2% and inflation under 2%… the Fed doesn’t have a clear reason to ease just yet.

It will soon… and that reason is going to be a stock market collapse.

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Interest-Rates

Tuesday, April 30, 2019

A Look Inside the Scheme to Eliminate Cash and Impose Negative Interest / Interest-Rates / War on Cash

By: MoneyMetals

Central bankers and politicians love inflation, but they need “bag holders” to have faith in the value of the fiat currency IOUs they hold. The trick is to avoid suddenly destroying the ephemeral confidence in currencies by printing too much too fast.

Central bankers may also need to limit the options inflation wary citizens have for escaping.

They are both shifty and innovative when it comes to making sure the ill effects of perpetually devaluing currency are primarily borne by the citizenry.

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Interest-Rates

Monday, April 22, 2019

Global Bond Market Bubble’s Ultimate Culmination / Interest-Rates / International Bond Market

By: Michael_Pento

Historically speaking, a normal Fed tightening cycles consist of raising the Fed Funds Rate (FFR) by 350-425bps. It is at that point that the yield curve usually inverts--thus, disincentivizing future lending and closing down the credit conduit. At that point the Fed backs off from future rate hikes. Then, about a year later, a stock market meltdown begins; and six months after that a recession ensues. During this current cycle, the Fed Open Market Committee (FOMC) has raised rates by just 250bps before turning dovish. Therefore, Wall Street takes solace in the view that this time around the Fed stopped in time before it killed the business cycle.

However, that 250bps of hiking is before you factor in the end of Quantitative Easing (QE) and the current Quantitative Tightening Program (QT), which is still an ongoing process and won't end until September. When you factor in the tightening that occurred when the Fed ended QE in October of 2014, which amounted to $85b per month of newly printed money at its peak and added a total of $3.7 trillion to the Fed’s balance sheet, the actual amount of tightening from ending QE is probably close to 300bps. And, the QT from the Fed will end up draining nearly $1 trillion from its balance sheet and reached $40-$50 billion per month at its peak. A reduction in the Fed’s balance sheet of anything close to $1 trillion is completely unprecedented and amounted to a tremendous drain on liquidity. Nobody knows exactly the amount of rate hikes this equates to, but it most likely added another 75bps of monetary tightening.

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Interest-Rates

Thursday, April 18, 2019

Low New Zealand Inflation Rate Increases Chance of a Rate Cut / Interest-Rates / Global Financial System

By: ElliottWaveForecast

New Zealand CPI (Consumer Price Index) only grew by 0.1% in the three months to March with annual increase of 1.5%. This is well below the 0.3% rate expected by the market. The RBNZ (Reserve Bank of New Zealand) annual inflation target is between 1%-3%. The latest result falls at the lower end of the range. This has raised speculation that the RBNZ may cut official interest rate as early as next month.

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Interest-Rates

Friday, April 12, 2019

Trump Calls for New Quantitative Easing to Prop Up U.S. Economy / Interest-Rates / Quantitative Easing

By: MoneyMetals

As gold and silver markets continue in choppy trading this spring, bulls are hoping a dovish Fed will sink the dollar and lift the metals.

Now that the Federal Reserve is on “pause” – presumably for the rest of 2019 – perhaps investors can stop obsessing over interest rate decisions by central planners. Perhaps markets can finally trade based on actual market signals and underlying fundamentals. 

Perhaps ... not.

With 2020 election campaigns already underway, interest rate policy will be a political football in the months ahead. Incumbent administrations almost always favor lower interest rates heading into their re-election bids, and this one is no exception.

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Interest-Rates

Wednesday, April 10, 2019

Is The Federal Reserve ‘Too Big To Fail’? / Interest-Rates / US Federal Reserve Bank

By: Kelsey_Williams

The term “too big to fail” refers to certain businesses whose viability is considered critical to the survival and effective operation of our economic system. These very large businesses are designated as too big to fail because their failure or bankruptcy would have disastrous consequences on the overall economy.

The potential effects are considered to be severe enough, and the costs so unbelievably large, that these businesses are afforded special attention and consideration in the form of bailouts and protection from creditors.

The expenses necessary in order to save a large institution from bankruptcy are considered less than the costs that would be incurred if the institution were allowed to fail. Active application and implementation of both alternatives were prominently featured in the financial crisis of 2008.

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Interest-Rates

Wednesday, April 03, 2019

Trump Readies Shake-up of Fed Banking Cartel / Interest-Rates / US Federal Reserve Bank

By: MoneyMetals

Establishment journalists, establishment economists, and establishment politicians are freaking out. It seems they can’t cope with the prospect of an outspoken monetary reformer potentially becoming the next member of the Federal Reserve Board of Governors.

President Donald Trump announced recently he would nominate longtime free-market advocate and close political ally Stephen Moore to a currently vacant seat at the Fed.

“Trump’s choice of former campaign adviser Stephen Moore to serve on the Federal Reserve Board is stirring misgivings among some bankers,” reports Politico.

“Economists are furious,” according to QZ. “The news has been met with a heady combination of derision, bafflement, and general hullaballoo, with Moore variously described as ‘a loyalist, not an expert’.”

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Interest-Rates

Tuesday, April 02, 2019

Why Is the Fed Paying So Much Interest to Banks? / Interest-Rates / US Federal Reserve Bank

By: Ellen_Brown

“If you invest your tuppence wisely in the bank, safe and sound, Soon that tuppence safely invested in the bank will compound, And you’ll achieve that sense of conquest as your affluence expands In the hands of the directors who invest as propriety demands.” — “Mary Poppins,” 1964

When “Mary Poppins was made into a movie in 1964, Mr. Banks’ advice to his son was sound. The banks were then paying more than 5% interest on deposits, enough to double young Michael’s investment every 14 years.

Now, however, the average savings account pays only 0.10% annually—that’s one-tenth of 1%—and many of the country’s biggest banks pay less than that. If you were to put $5,000 in a regular Bank of America savings account (paying 0.01%) today, in a year you would have collected only 50 cents in interest.

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Interest-Rates

Tuesday, April 02, 2019

Inverted Yield Curve Fears Are Early / Interest-Rates / Inverted Yield Curve

By: John_Mauldin

Last week, the yield curve inverted for the first time since 2007. The yield for 10-year Treasuries fell below the yield for the 3-month T-Bill.
The inversion set off alarm bells and US stocks fell sharply. While concerns are reasoned, the alarm bells may be premature.

Inversion is an historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, although it’s likely.

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Interest-Rates

Sunday, March 31, 2019

Warning: Central Banks CANNOT Normalize Policy… Ever / Interest-Rates / Negative Interest Rates

By: Graham_Summers

As I have been warning for years, Central Banks CANNOT normalize the Everything Bubble they created between 2008 and 2016.

Yesterday, yet another major Central Bank confirmed that I was correct. In this particular case, it was the European Central Bank (ECB).

The ECB first cut interest rates to NEGATIVE in 2014. It then lowered them an additional three times to -0.4% in 2016.

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Interest-Rates

Wednesday, March 27, 2019

Yield Curve Has Inverted. Will Gold Rally Now? / Interest-Rates / Inverted Yield Curve

By: Arkadiusz_Sieron

The yield curve followed suit of the Fed and also inverted. Inverted yield curve is a sign of an incoming recession, they say. However, what is the background of this yield inversion and how will gold react to its emerging story?

Red alert! Or, actually, a yield alert! After months of worries, the yield curve has finally inverted. Well, maybe not the whole yield curve, but one of its segment. As one can see in the chart below, the spread between US 10-year Treasury and 3-Month Treasury dived on Friday to its lowest since 2007.

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Interest-Rates

Wednesday, March 27, 2019

Has The Fed Finally Lost Control Of US Interest Rates? / Interest-Rates / US Interest Rates

By: Avi_Gilburt

Back in the 1940’s, Ralph Nelson Elliott once noted:

At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend.

So, rather than be startled by the news of the past week, I have been trying to warn anyone who was willing to listen that if you want to know what the Fed is going to do, simply read the bond charts. You see, the Fed does not lead the market. Rather, the Fed follows the market. And, the market told me back in late 2018 that the Fed is about to fall behind the market.

Yet, almost every single person who reads this article will think I am crazy for saying something so ridiculous. Right? But, that is why I was prepared for the action seen in the bond market this past week, and not shocked as most participants seemed to be. In fact, one of my subscribers laughingly posted an article in our chatroom entitled "Riding the Bond Rally No One Saw Coming," while noting how our members were certainly quite prepared for this rally in the bond market.

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Interest-Rates

Tuesday, March 26, 2019

US Treasury Bond Yield Inversion and Political Fed Cycles / Interest-Rates / Inverted Yield Curve

By: Chris_Vermeulen

With so much news hitting the wires regarding the Treasury Inversion level and the “potential pending recession”, we wanted to shed a little insight into this phenomenon and what we believe the most likely outcome to be going forward.  Our researchers, at Technical Traders Ltd., believe the Treasure inversion is a reactionary process to overly tight US Fed monetary policies, consumer demand factors and outside cycle forces.  There is very little correlation to inverted Treasury levels and causation factors other than the US Fed and global central banks.  We believe consumers and consumer sentiment also play a role in setting up the conditions that prompt yield inversion.  The one aspect we believe everyone fails to consider is the uncertainty that is associated with major US election cycles.

The US Fed is obviously a driving force with regards to yields and consumer expectations.  In the past, the US Fed has rotated FFR levels up and down by enormous amounts (in some cases 200 to 500%+ over very short spans of time.  Consumers, you know those people, the ones that are the actual driving force of the local and state level economies, have been the the ones having to deal with wildly rotating FFR levels and the consequences of their debt rotating from 4~7% average interest rates to 8~25%+ average interest rates over the span of just a few years.

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Interest-Rates

Monday, March 25, 2019

Real US National Debt Might Be $230 Trillion / Interest-Rates / US Debt

By: John_Mauldin

Trump has promised to free the US of debt. He pledged to pay all federal debt off in eight years.

But so far, it’s been just talk. Two years into Trump’s presidency, the US national debt has grown by $2 trillion.

The official, on-the-books federal debt is now at $22.1 trillion. $22.1 trillion is the face amount of all outstanding Treasury paper, including so-called “internal” debt.

It comes to about 105% of GDP, and that’s only the federal government.

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Interest-Rates

Sunday, March 24, 2019

The Fed Follows Trump's Tweets, And Does The Right Thing / Interest-Rates / US Interest Rates

By: Steve_H_Hanke

Earlier this week, the Fed left its target Fed funds rate unchanged at 2.25-2.50%. In addition, the Fed indicated that it had turned dovish. Rather than two Fed funds rate hikes in 2019, the Fed has now signaled that there will be none. And that’s not all. Starting in May, the Fed will reduce its balance sheet unwind of its Treasury holdings to $15 billion per month from $30 billion, and that it will end the unwind in September.

All this dovishness must have warmed the cockles of President Trump’s heart. For some time, Trump has been targeting the Fed with Twitter storms that have complained that the Fed has been too hawkish.

Well, the Fed apparently saw what the President saw. Or, maybe not. After all, one line of argument used to support the Fed’s new dovish stance is that the stance is necessary given the uncertainties that abound—both at home and abroad (read: regime uncertainties being created by President Trump himself).

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Interest-Rates

Friday, March 22, 2019

Elliott Wave: Fed Follows Market Yet Again / Interest-Rates / US Interest Rates

By: EWI

By Steve Hochberg and Pete Kendall

Back in December, we wrote an article titled "Interest Rates Win Again as Fed Follows Market."

In the piece, we noted that while most experts believe that central banks set interest rates, it's actually the other way around—the market leads, and the Fed follows.

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Interest-Rates

Friday, March 22, 2019

Next Recession: Finding A 48% Yield Amid The Ruins / Interest-Rates / US Bonds

By: Dan_Amerman

In a previous analysis we examined how to create a 21% yield, as the incidental byproduct of the Fed's plans for the cyclical containment of recession.

In this analysis, we will deepen that examination and visually illustrate the financial mathematics that would create a potential 48% yield from what the Federal Reserve plans to do in the event of another recession.

This analysis is part of a series of related analyses, an overview of the rest of the series is linked here.

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Interest-Rates

Tuesday, March 19, 2019

US Overdosing on Debt / Interest-Rates / US Debt

By: Harry_Dent

On Friday, I talked about how the last 11 years have been no better than cumulative GDP during the Great Depression (1929-1940). I’ll talk more about that on Thursday. Today I want to point out the biggest difference between this Economic Winter Season and the one 80 years ago…

That is: Central banks!

Thanks to their interference, our massive debt bubble didn’t deleverage as it should have!

Total debt peaked at $58.4 trillion, or four times GDP, in the first quarter of 2009 and just barely deleveraged in the financial and consumer sectors during the Great Recession.

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Interest-Rates

Sunday, March 17, 2019

This Is How You Create the Biggest Credit Bubble in History / Interest-Rates / Global Debt Crisis 2019

By: John_Mauldin

Last week, the ECB announced it would keep record-low interest rates for longer. The news comes shortly after the Fed gave in to the market and held off on further rate hikes.

While investors celebrate the policy reversal, they might soon regret it.

This stimulus may indeed buy the market an additional year or two. But postponing the inevitable downturn with artificially low rates will come at a cost.

The cost is a massive credit bubble that is already of biblical proportions. Its implications chill me to the bone.

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Interest-Rates

Wednesday, March 13, 2019

US Federal Borrowing Crosses the Rubicon / Interest-Rates / US Debt

By: MoneyMetals

A year ago, Republicans in control of Congress suspended the cap on federal borrowing. The limit was automatically re-imposed on March 1st. Politicians now have a few months to hammer out legislation to raise the cap as the Treasury employs “extraordinary measures” to fend off default.

The federal deficit is mushrooming once again. The 2017 tax cuts have taken a bite out of receipts at the IRS and economic growth has not met expectations.

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