Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Saturday, April 25, 2015
Negative Interest Rates Financial Black Hole / Interest-Rates / International Bond Market
By: GoldSilverWorlds
It feels like not a single soul is worried about the increasing amount of negative interest rates. Ignorance or indifference? This could become a very expensive ordeal.
A black swan event is a metaphor for an enormous problem that develops underneath the surface and then suddenly puts the whole financial system at risk. The financial crisis of 2008 was a black swan event, for example, that slowly developed in the US real estate market where excess had ruled in the years before.
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Wednesday, April 22, 2015
Bill Gross - German 10-Year Bunds Short of a Life Time / Interest-Rates / Germany
By: Bloomberg
Bill Gross of Janus Capital spoke with Bloomberg Television's Alix Steel about yields on the 10-year German bund, his bet against German debt and the European Central Bank's program of quantitative easing.
On shorting the bund, Gross said: "Most investors would probably want to wait for 12 to 18 months because that's when the Eurozone and the ECB's quantitative easing program ends. And one of the reasons for the overvaluation of bunds has to do with Mario Draghi and his program of EUR60 billion a month in terms of buying power. And so you don't want to fight the Fed or the ECB, I suppose, and then getting in early is doing that to a certain extent."
Friday, April 17, 2015
The Consequences of The Fed's Interest Rate Hike / Interest-Rates / US Interest Rates
By: Arkadiusz_Sieron
Although sometimes we doubt whether the Fed is going to increase interest rates soon, it is worth analyzing the consequences of such a game-changing move. The hike would be the first in nearly a decade. Theoretical effects of rising interest rates are well-known: higher interest rates mean higher borrowing costs (something to consider: if you have a variable rate mortgage and believe that Fed will eventually hike interest rates, think about locking in at current low rates with a fixed-rate mortgage), lower asset prices, reduced risk-premium and a stronger greenback. All of these are relatively bad for the stock market. Higher discount rates mean lower stock prices, while reduced risk-premium makes equities less attractive compared to new issues of bonds. Higher borrowing costs hurt indebted companies, while a stronger greenback negatively affects the exporters and international businesses, which are a significant part of the U.S. stock market. This is why the equity indices were generally falling in March in anticipation of the Fed's hike and surged after the publication of the dovish FOMC statement.
Wednesday, April 15, 2015
Boom Zero Interest Rates / Interest-Rates / US Interest Rates
By: Gary_Tanashian
There is so much data flying around out there. From the Credit data we reviewed yesterday to weakening manufacturing and exports to employment up nicely one month and down big the next, to frisky consumers (the economy’s ‘back end’, putting it nicely) out there confidently living it up.
Wednesday, April 08, 2015
Cost of Negative Bank Interest Rates / Interest-Rates / Credit Crisis 2015
By: BATR
So you thought that the unimaginable could not happen. The signal is heard loud and clear. Keeping your money in a fiduciary account will not only earn no interest; there will be an actual cost of parking your funds in a bank relationship. The madness that has engulfed the financial sector is preparing to escalate the systematic looting of saved capital. Ponder the consequences of negative bank rates and ask, what exactly can anyone do or where can they place their money for safekeeping. The first objective of entrusting your funds to a financial institution is to have the ability to obtain access to the return of your capital.
Tuesday, April 07, 2015
U.S. Interest Rates - How the Federal Reserve Has Completely Fooled Us for Years / Interest-Rates / US Interest Rates
By: DailyWealth
Dr. Steve Sjuggerud writes: We must be idiots...
The Federal Reserve has completely fooled us for more than six years...
"Higher interest rates are just around the corner," they tell us today.
The thing is, they've told us that over and over – since the Fed first cut interest rates to zero back in 2008.
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Monday, April 06, 2015
3 Sigma Extremes In the U.S. Treasury Bond Market / Interest-Rates / US Bonds
By: DeviantInvestor
US T-Bond futures closed Friday, March 27 up nearly 12% from the February close. That was the 3rd largest monthly percent move since 1977 when my data begins and created a 3.61 standard deviation change. This is a huge move. What does it mean?
The US T-Bond market peaked on March 25 at an all-time high over 165, up from about 75 in 1990. Bonds move inversely with yields, so yields have dropped to their lowest level ever. This is not surprising because central banks have been monetizing sovereign debt, buying bonds, and supporting the bond and stock markets. Several $Trillion in European sovereign debt currently “pays” negative interest – an extreme condition. The Bank of Japan has aggressively purchased Japanese government bonds as well as Japanese stocks – another extreme example of a bond bubble.
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Wednesday, April 01, 2015
Did The Fed Just Admit to Deep Uncertainty About Our Financial Security In Retirement? / Interest-Rates / Pensions & Retirement
By: Dan_Amerman
Generally speaking, the chairperson of the Federal Reserve is treated by the mainstream financial media as being the very paragon of respectability. If the Fed says it - then the voice of economic authority has spoken, and we need to listen carefully.
Yet, recent comments by Janet Yellen have instead made her a source of "controversial" economic ideas, with some financial reporters and their editors apparently feeling a duty to protect their reading audience - and let them know this is not acceptable economic thinking, but rather is "far outside the mainstream."
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Wednesday, April 01, 2015
Iceland Ponders Radical Banking Plan to Eliminate Fractional Reserve Lending / Interest-Rates / Global Financial System
By: Mike_Shedlock
I have long railed against fractional reserve lending, duration mismatches (e.g. banks issuing 2-year CDs and lending money for 15-year mortgages), bank's ability to lend money into existence, and deposit insurance.
Fractional reserve lending allows banks to lend out a near infinite amount of credit with essentially no backing. Money inevitable creates asset bubbles, but as long as the bubbles are expanding it appears the system is solvent.
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Wednesday, April 01, 2015
Bernanke Double Tap / Interest-Rates / US Federal Reserve Bank
By: Brady_Willett
The promotion of 'risk taking' during Bernanke's tenure was, without question, done at the immediate expense of traditional 'savings'. Deal with it Bernanke.
Former Fed Chairman, Ben Bernanke, began his new 'blog' yesterday with a dandy entitled 'Why Are Interest Rates So Low?' Given that only those with a financial acumen would read a blog from Bernanke, the silliness offered was remarkable. Nevertheless, here goes:
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Tuesday, March 31, 2015
No Body Understands Debt - Living in a Free-Lunch World / Interest-Rates / Global Debt Crisis 2015
By: John_Mauldin
“Everyone is a prisoner of his own experiences. No one can eliminate prejudices – just recognize them.”
– Edward R. Murrow, US broadcast journalist & newscaster (1908 – 1965), television broadcast, December 31, 1955
“High debt levels, whether in the public or private sector, have historically placed a drag on growth and raised the risk of financial crises that spark deep economic recessions.”
– The McKinsey Institute, “Debt and (not much) Deleveraging”
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Tuesday, March 31, 2015
Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It / Interest-Rates / US Interest Rates
By: Mike_Shedlock
Ben Bernanke just started his own blog at the Brookings Institute. His first post, from today, Inaugurating a New Blog is the announcement.
Let's dive into Bernanke's second post of the day: Why are Interest Rates So Low?
Bernanke: Low interest rates are not a short-term aberration, but part of a long-term trend. As the figure below shows, ten-year government bond yields in the United States were relatively low in the 1960s, rose to a peak above 15 percent in 1981, and have been declining ever since. That pattern is partly explained by the rise and fall of inflation, also shown in the figure.
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Monday, March 30, 2015
No FED Bets From the BIS / Interest-Rates / Central Banks
By: Dr_Jeff_Lewis
It is becoming harder and harder to ignore the fact that central banking policy isn’t exactly working out for the real economy. More wealth has been funneled toward an increasingly small and concentrated pool of unproductive paper wealth. But low and behold, it looks like the political-monetary landscape is being groomed in preparation for the next leg of this ongoing train wreck. Now the Bank for International Settlement (BIS), the central bank bank of central banks, is throwing the Fed under the bus.
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Friday, March 27, 2015
Central Banks Paralysed / Interest-Rates / Central Banks
By: Alasdair_Macleod
Though the Fed would deny it, it is clear from the minutes of the last Federal Open Market Committee (FOMC) meeting that a rise in interest rates has been put off indefinitely. The subsequent rally in the price of gold and the sudden fall in the dollar tend to confirm this conclusion.
The Fed Funds Rate, which is the interest rate the Fed targets to set all other rates, has now been less than 0.25% for six and a quarter years, gradually declining from roughly 0.15% to about 0.10% today. It was set at a target range of between zero and 0.25% in December 2008.
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Friday, March 27, 2015
Atlanta Fed President's Dilemma / Interest-Rates / US Federal Reserve Bank
By: Dan_Norcini
'tis the week to hear from the various Fed governors once again.
Today it is Atlanta Fed president Dennis Lockhart.
I am finding his comments rather unsettling after reading one part of them.
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Thursday, March 26, 2015
The Monetary Approach Reigns Supreme / Interest-Rates / Money Supply
By: Steve_H_Hanke
We are still in the grip of the Great Recession. Economic growth remains anemic and below its trend rate in most parts of the world. And what’s more, this state of subdued economic activity has been with us for over seven years.In the U.S. (and elsewhere) the central bank created a classic aggregate demand bubble that became visible in 2004. The Fed’s actions also facilitated the creation of many market-specific bubbles in the housing, equity, and commodity markets. These bubbles all dramatically burst, with the bankruptcy of Lehman Brothers in September 2008.
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Tuesday, March 24, 2015
Janet Yellen Give'em the Old Razzle Dazzle / Interest-Rates / US Federal Reserve Bank
By: Peter_Schiff
Janet Yellen channels Billy Flynn? Last week the Fed Chairwoman treated us to a master class of rhetorical misdirection which produced some memorable examples of doublespeak, including the soon to be classic "Just because we removed the word 'patient' does not mean we're going to be 'impatient."' But perhaps more surprising than her new heights of verbal dexterity was the market's euphoria at being so blatantly manipulated. Never has the financial world enjoyed a lie so thoroughly.
Monday, March 23, 2015
The Negative Interest Rates in Europe / Interest-Rates / ECB Interest Rates
By: Arkadiusz_Sieron
We wrote in one of our daily articles that Sweden had cut its main interest rate into negative territory (-0.10 percent). That way the Riksbank followed other European central banks. Currently, except Sweden, the negative interest rates are set by the Central Bank of Denmark, the European Central Bank and the Swiss National Bank. What does such a historically unusual monetary policy mean for the financial markets?
Monday, March 23, 2015
Yellen Runs Out Of Patience, But Not Excuses / Interest-Rates / US Federal Reserve Bank
By: Michael_Pento
The Fed removed the word Patience from its statement made following the FOMC meeting that concluded on Wednesday. But, taking out that one word proved to be mostly irrelevant. The removal of the patient language was more than offset by the Fed's lowering of its GDP growth estimates and its projection for when and how high it will raise rates based on its previously incorrect assessments of inflation and growth. Ms. Yellen said in the FOMC press conference that removing "Patient" did not mean she would become impatient with raising rates. It is clear that the dollar's strength and the cascading economic data reported since the start of 2015 caused the Fed to push out its timing for its first rate hike and the overall level for which it will finally reach equilibrium.
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Sunday, March 22, 2015
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative / Interest-Rates / Economic Theory
By: Thorsten_Polleit
Some economists have been arguing that the “equilibrium real interest rate” (that is the “natural interest rate” or the “originary interest rate”) has become negative, as a “secular stagnation” has allegedly caused a “savings glut.”1
The idea is that savings exceed investment, and that a negative real interest rate is required for bringing savings in line with investment. From the viewpoint of the Austrian school, the notion of a “negative equilibrium real interest rate” doesn’t make sense at all.2
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