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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, July 08, 2021

US Interest Rates: Making the Improbable Today’s Reality / Interest-Rates / US Bonds

By: Paul_Rejczak

The US Federal Reserve has raised its interest rate guidance for 2023; and potentially late 2022. Oddly enough, interest rates have moved lower since the last Fed meeting.

I see an opportunity today.

You would think that the higher interest rate guidance would have created a bump higher in the $TNX (Ten-Year Note Yield). However, wouldn’t that make too much sense? The more trading experience I have gotten over the last two decades, the clearer it is, that logic doesn’t always work - unless you are early enough.

If you have been following along, you know that yesterday, I discussed the S&P Banking sector, namely KBE, as we wait for a pullback to some key technical levels.

It got me thinking: the Ten-Year Note yield should be very similar to that trade.

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Interest-Rates

Friday, June 18, 2021

FOMC Surprise Takeaways / Interest-Rates / US Federal Reserve Bank

By: Monica_Kingsley

The Fed didn‘t play ostrich on inflation, but didn‘t take action either. While acknowledging that 2021 inflation would come at 3.4%, it hinted at 2 rate hikes before 2023 is over – and didn‘t mention taper at all.

It‘s though by no means guaranteed that 2021 inflation would come in at this or lower level. Far from it, but Fed‘s yesterday posturing might be a self fulfilling prophecy in one aspect, and that is commodity prices fanning the inflation flames – thus far though, $CRB doesn‘t confirm that, which has bullish implications for oil and beyond. Stock bulls too can look forward for extending gains without a meaningful correction. As for the labor market pressures, I look for these not to be going away soon.

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Interest-Rates

Wednesday, June 09, 2021

Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? / Interest-Rates / US Federal Reserve Bank

By: MoneyMetals

‘Taper’ talk from the Federal Reserve is back in focus. But for now, it’s all talk and no action.

Last week, former New York Fed President William Dudley said the central bank will begin the process of tapering – winding down its monthly asset purchases – by year end.

While echoing current Fed policymakers’ position that the recent spike in prices is “transitory,” Dudley acknowledged the likelihood of inflation persisting above 2% longer term.

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Interest-Rates

Tuesday, June 08, 2021

Fed’s Tools are Broken / Interest-Rates / US Federal Reserve Bank

By: Michael_Pento

The U.S. central bank has metastasized from an institution that was originally designed to assist distressed banks, to one that believes its purview now includes perpetuating asset bubbles, fighting global warming and reconciling racial inequities. Another distortion of the original purpose of the Fed is that its mandate has changed from providing stable prices and full employment, to creating an inflation rate above 2% for a period of time equivalent to the duration it was below that level.

But the members of the FOMC claim there is nothing to fear if inflation were to ever grow too hot because it has the tools to bring it under control. In other words, when necessary, the FOMC can not only stop QE but it can raise rates aggressively enough to vanquish inflation without destroying the markets and economy along the way. Let’s see just how true this contention really is.

But before we get to how “successful” the fed will be to tame inflation, a funny thing happened on the way to achieve its 2% goal. Our central bank focuses on the incredibly distorted core rate of inflation found in the Personal Consumption Expenditures Price Index. But meanwhile, prices are surging in the real world. For instance, headline PCE inflation increased by 3.65% year over year in April. And even in the fed's preferred metric, prices jumped by 3.1% y/y. Not only this, but a slightly less massaged reading of inflation, which can be found in the headline CPI metric, had prices rising by 4.2% y/y.
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Interest-Rates

Sunday, May 23, 2021

US 10-Year Note Yields: Opportunity to Benefit? / Interest-Rates / US Bonds

By: Submissions

Given yesterday’s headlines with Bitcoin plunging, did you take a peek at interest rates? Could a stronger dollar lie ahead with higher rates?

While everybody’s eyes are peeled on cryptocurrencies and a crowded short DXY trade, let’s revisit the potentially polar opposite of a crypto instrument: 10-year notes. Yields rose on Wednesday, settling at 1.683%, just off the intraday high of 1.692%. I like to take a look when few others are looking. As yields closed near the highs of the day, with other risk assets seeming out of favor, at least temporarily, let’s revisit the 10-year notes.

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Interest-Rates

Thursday, April 29, 2021

Get Ready for the Fourth U.S. Central Bank / Interest-Rates / Central Banks

By: Michael_Pento

We all should be aware that the current Federal Reserve of the Unites States is not America’s first central bank. In fact, we’ve had a few others before this current disastrous iteration came into existence in 1913. We hope and believe it won’t be long before this latest version goes away for good.

Our first central bank was founded in 1782 and was called The Bank of North America. Soon after, in 1791, The Bank of North America became The First Bank of the United States chartered by Congress.  However, in 1811 its twenty-year charter expired and was not renewed.

Five years later Congress chartered its successor called the Second Bank of the United States that lasted from 1816-1836. This Central Bank collapsed for the same reason the others did before it: they were, for the most part, filled with corruption and became progenitors of speculation and economic instability.

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Interest-Rates

Wednesday, April 14, 2021

U.S. Dollar Junk Bond Market The Easiest Money in History / Interest-Rates / US Bonds

By: EWI

The latest data from Refinitiv shows that companies have raised a record $140 billion in the U.S. dollar junk bond market during the first quarter of this year. That beats the previous record set during the second quarter last year when companies scrambled to issue debt in a bid to raise cash during the pandemic. The three biggest issuance quarters in history have been set in the past year. With investors falling over themselves to lend money to any venture offering a U.S. dollar yield above 4%, companies are now not only finding that they can raise money easily in order to roll over existing debt, but some are using the proceeds to pay dividends to owners. It's beyond absurd.

When a mania is in full force, though, the vast majority of participants are blind to the absurdity. Investors, for instance, think that they must lend because 4% or higher is such a juicy yield when compared with anything else. And the central banks will not let companies fail, so it's a free lunch.

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Interest-Rates

Wednesday, April 07, 2021

Yes, the Fed Will Cover Biden’s $4 Trillion Deficit / Interest-Rates / Quantitative Easing

By: MoneyMetals

Central bankers and their comrades in Washington DC changed course in 2020. The policy shifted from “print money and hand it to Wall Street” to “helicopter money” in the form of direct payments and loans to citizens.

The fiscal stimulus, like the Fed’s monetary stimulus before it, provided a fix that addicted markets needed to stay high.

The helicopter money represents another “temporary” measure that will almost certainly become permanent. Much like Quantitative Easing and Zero Interest Rate Policy, bureaucrats will have a very hard time stopping what they have started.

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Interest-Rates

Friday, March 26, 2021

Freedom Fatality of the Fed / Interest-Rates / US Federal Reserve Bank

By: Michael_Pento

In a recent interview, I referred to the Fed as a disgusting institution. I want to explain why I believe that to be the case, as I do not like to disparage anyone or any entity indiscriminately or capriciously—only when absolutely necessary. To be clear, central bankers may not be nefarious in nature, but their product is iniquitous.

Any entity whose very purpose for existence is to destroy markets is inherently disgusting and, in the end, one that ends up being evil.  At its core, the Fed is Robin-Hood in reverse; stealing from the poor by destroying their purchasing power to give to the rich by inflating their asset prices. The Fed, along with all central banks, are inherently freedom killers, middle-class eviscerators and economic destabilizers; regardless of stated intentions. If that wasn’t bad enough, the problem now is that the Fed has usurped markets to the point of no return.

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Interest-Rates

Thursday, March 25, 2021

It’s the Bond Market, Stupid / Interest-Rates / US Bonds

By: Gary_Tanashian

As our Continuum chart predicted over a year ago, Jerome Powell was called to his higher inflationary powers when the macro markets liquidated with great violence and terror. This link shows the Continuum (30yr yield and its monthly EMA 100 limiter) as it was then, begging for inflationary action…

Oh Jerome? Bond market calling…

Below is the Continuum today. Since the linked post from February, 2020, a lot has happened and it has been according to the plans we laid out last spring. The plan was inflationary because the Fed was going into steroidal inflation mode. The ‘Fed comfort box’ on the chart has thinned out from the original post because the red dotted limiter (monthly EMA 100) has declined appreciably since then.

These many months the NFTRH target has been 2.5% to 2.7% on the 30yr Treasury yield. This week that zone’s lower bound got dinged. It is coming time for a cool down at least, if the macro reflation is going to get a second wind. What could provide that second wind?

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Interest-Rates

Tuesday, March 09, 2021

US Bond Market Rocks the Richter Scale / Interest-Rates / US Bonds

By: Michael_Pento

The global sovereign bond market is fracturing, and its ramifications for asset prices cannot be overstated. Borrowing costs around this debt-disabled world are now surging. The long-awaited reality check for those that believed they could borrow and print with impunity has arrived. From the U.S., to Europe and across Asia, February witnessed the biggest surge in borrowing costs in years.

Thursday, February 25, 2021, was the worst 7-year Note Treasury auction in history. According to Reuters, the auction for $62 billion of 7-year notes by the U.S. Treasury witnessed demand that was the weakest ever, with a bid-to-cover ratio of 2.04, the lowest on record. Yields on the Benchmark Treasury yield surged by 26 bps at the high—to reach a year high of 1.61% intra-day--before settling at 1.53% at the close of trading.

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Interest-Rates

Wednesday, February 24, 2021

US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) / Interest-Rates / US Debt

By: Nadeem_Walayat

One of the reasons why my analysis of April 2019 was more subdued in terms of the prospects for US house prices than it would otherwise have been is because the yield curve was flirting with inversion, that I concluded that the Fed would not allow to take place and thus adopt whatever measures were necessary to PREVENT inversion that tends to foreshadow lower inflation and recessions.

The Fed succeeded in preventing a sustained inversion during 2019, with the yield curve massaged to hover around 0.2% that is until the pandemic broke and the Fed panicked and opened the monetary flood gates sending the yield curve soaring to currently stand at 1% as the bond market is discounting higher future inflation as the consequence of rampant money printing.

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Interest-Rates

Sunday, February 07, 2021

TREASURY YIELDS SUGGEST A TOP WITHIN THE NEXT 6 MONTHS / Interest-Rates / US Bonds

By: Chris_Vermeulen

Historically, whenever the Treasury Yields fall below zero, then recover back above zero, the US/Global markets reach some peak in price levels within 3 to 8+ months.  My research team and I believe the actions of the global markets may be setting up for a future peak in price levels sometime in next 6 months. We believe this will start when the Treasury Yields cross above the “Breakdown Threshold”.

expect A Continued Rally As Long As Yields Stay Below Certain Levels

In 1998, a very brief drop below zero in yields prompted a minor pullback in the markets before the bigger top setup in 2000.  This pullback in price aligned with what we are calling the “Breakdown Threshold” level on Yields near 1.20.  After the Yields crossed this Threshold, briefly, in 1999, they fell back below this level and the US stock market continued to rally toward an ultimate peak in 2000.

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Interest-Rates

Thursday, January 28, 2021

US Interest Rate Threshold Keeps Dropping / Interest-Rates / US Interest Rates

By: Michael_Pento

Initial Jobless claims totaled 900,000 for the week ending January 16th, after shedding 965,000 in the week prior. These numbers are over four times greater than they were a year ago. I find this to be not only sad but also remarkable in that we are still losing close to one million jobs per week a year after the Wuhan virus first broke out. More signs of economic stress were found in the December Retail Sales report. Sales dropped 0.7% last month, and the data for November was revised down to show a decline of 1.4%, instead of the 1.1% previously reported. Figures such as these illustrate just how fragile the economy still is, which will automatically put upward pressure on the level of outstanding debt. And, gives the new Administration impetus to pass more and bigger fiscal stimulus packages. That's really bad news for any of us left that still care about debt and deficits.
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Interest-Rates

Wednesday, January 06, 2021

Fed Taper Nervous Breakdown / Interest-Rates / Quantitative Easing

By: Michael_Pento

The next time the Fed reduces its bond purchase program the market reaction should be more like a nervous breakdown rather than just a tantrum.

First let’s review a bit of the historical histrionics surrounding the initial Taper Tantrum. Back in September 2012, the Fed’s Quantitative Easing program was running at the level of $85 billion per month. The asset purchase program consisted of both Mortgage-Backed Securities and Treasuries. Then, in December 2012, Fed Chair Ben Bernanke expanded his massive QE 3 scheme by making its duration unlimited. But by May 2013, the time had finally arrived to start discussing the tapering of its asset purchases. And in December of that year Tapering officially began; with QE ending by October 2014. Of course, the Fed would be back in the QE game six years later. But at the time, the overwhelming consensus thinking was that the 100-year economic storm had passed and we would never witness such extraordinary actions by our central bank ever again.

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Interest-Rates

Saturday, December 26, 2020

Global Tipping Point: "Good" Debt Vs. "Bad" Debt (Which is Winning?) / Interest-Rates / Global Debt Crisis 2020

By: EWI

All major U.S. economic depressions were "set off" by this single factor

Isn't all debt "bad"?

Well, in a word, no.

Broadly speaking, there are two types of debt. One of them actually adds value to the economy if handled in the right way, so you might call this a "good" form of debt. However, there's another type of debt (or credit) which hurts the economy.

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Interest-Rates

Monday, December 21, 2020

Overstretch: The Long Shadow of Soaring US Debt  / Interest-Rates / US Debt

By: Dan_Steinbock

If the past year was dominated by the huge human costs of COVID-19, the next few years will be about its economic aftermath, including the alarming rise of US debt. What’s needed is multilateral cooperation - a new 'Grand Alliance.'

On Friday, Congressional leaders failed to secure a bipartisan deal on a $900 billion pandemic relief package. A government shutdown was avoided only with a 2-day extension.

A protracted shutdown would amplify the risks for pandemic escalation and economic crisis, amid the long-awaited vaccine rollout. Bipartisan tensions are compounded by the impending Georgia Senate runoff races in January that will determine control of the chamber in the Congress.

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Interest-Rates

Monday, December 07, 2020

What Do We Do with All This Debt? / Interest-Rates / US Debt

By: John_Mauldin

Before the coronavirus pandemic I expected the US would hit the debt wall in the late 2020s. Now, the debt is growing even faster and we will hit that wall a lot sooner.

What happens when we come to the place where we have to deal with all that debt?

Fortunately, my favorite central banker, Bill White -- who was the Bank for International Settlements' chief economist -- did a brilliant interview with my friend Mark Dittli in Switzerland in November that gives us some answers.

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Interest-Rates

Monday, November 23, 2020

Evolution of the Fed / Interest-Rates / US Federal Reserve Bank

By: Michael_Pento

The evolution of humankind supposedly goes something like this: From a void and through a series of serendipitous happenstances arose; galaxies, the Earthly Primordial ooze, Bacteria, Monkeys, and eventually homo sapiens (wise man). The evolution of the Fed is deserving of equal derision, but with a much worse outcome.

Back in 1913, the Federal Reserve Act gave birth to the Federal Reserve System. The law gave power to the central bank to become a lender of last resort to financial institutions. If a bank found itself in trouble, it could approach the discount window and exchange 100% guaranteed government debt for Fed credit at a deep discount. This process defined the majority of the Fed's role for decades to follow.
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Interest-Rates

Wednesday, November 18, 2020

US Bond Market: "When Investors Should Worry" / Interest-Rates / US Bonds

By: EWI

The cost of insuring against default has been declining – what this may suggest

You may recall hearing a lot about “credit default swaps” during the 2007-2009 financial crisis.

As a reminder, a CDS is similar to an insurance contract, providing a bond investor with protection against a default.

In the past several months, the cost of that protection has fallen dramatically.

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