Tag Archive: Bonds

Never Attribute To Malice What Is Easily Explained By Those Attributing Anything To Term Premiums

2019-10-13

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2019-10-13

US Treasury CMT Yields, 2017-2019
There will be more opportunities ahead to talk about the not-QE, non-LSAP which as of today still doesn’t have a catchy title. In other words, don’t call it a QE because a QE is an LSAP not an SSAP. The former is a large scale asset purchase plan intended on stimulating the financial system therefore economy. That’s what it intends to do, leaving the issue of what it actually does an open question.

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The Scientism of Trade Wars

2019-10-11

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2019-10-11

Germany Factory Orders, SA 2014-2019
One year ago, last October, the IMF published the update to its World Economic Outlook (WEO) for 2018. Like many, the organization began to talk more about trade wars and protectionism. It had become a topic of conversation more than concern. Couched as only downside risks, the IMF still didn’t think the fuss would amount to all that much. Especially not with world’s economy roaring under globally synchronized growth. Even though there were...

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From JOLTS Series Shift To Series of Rate Cuts

2019-10-10

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2019-10-10

Average Weekly Hours All Employees, 2007-2019
I’ve said all along that they would be dragged into them kicking and screaming. After all, the Federal Reserve undertook its last rate hike in December 2018 – just as the markets were making clear he was completely mistaken in his view of the economy. What followed was the ridiculous “Fed pause” which pretty much everyone outside of the central bank and the Economics profession knew wasn’t the end of it.

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Head Faking In The Empty Zoo: Powell Expands The Balance Sheet (Again)

2019-10-09

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2019-10-09

Federal Reserve Balance Sheet, 2001-2019
They remain just as confused as Richard Fisher once was. Back in ’13 while QE3 was still relatively young and QE4 (yes, there were four) practically brand new, the former President of the Dallas Fed worried all those bank reserves had amounted to nothing more than a monetary head fake. In 2011, Ben Bernanke had admitted basically the same thing.

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The Consequences Of ‘Transitory’

2019-10-08

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2019-10-08

Euro Interbank, 2019
Europe’s QE, as noted this weekend, is off to a very rough start. In the bond market and in inflation expectations, the much-ballyhooed relaunch of “accommodation” is conspicuously absent. There was a minor back up in yields between when the ECB signaled its intentions back in August and the few weeks immediately following the actual announcement.

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Big Trouble In QE Paradise

2019-10-07

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2019-10-07

Germany 10-year Bund Yield, 2014-2016
Maybe it was a sign of things to come, a warning how it wasn’t going to go as planned. Then again, when it comes to something like quantitative easing there really is no plan. Other than to make it sound like there is one, that’s really the whole idea. Not what it really is and what it actually does, to make it appear like there’s substance to it.

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Why The Japanese Are Suddenly Messing With YCC

2019-10-06

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2019-10-06

Japan JGB Curve Spreads, 1985-2019
While the world’s attention was fixated on US$ repo for once, the Bank of Japan held a policy meeting and turned in an even more “dovish” performance. Likely the global central bank plan had been to combine the Fed’s second rate cut with what amounted to a simultaneous Japanese pledge for more “stimulus” in October. Both of those followed closely an ECB which got itself back in the QE business once more.

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ISM Spoils The Bond Rout!!! Again

2019-10-05

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2019-10-05

Eurodollar Futures June 2020
For the second time this week, the ISM managed to burst the bond bear bubble about there being a bond bubble. Who in their right mind would buy especially UST’s at such low yields when the fiscal situation is already a nightmare and becoming more so? Some will even reference falling bid-to-cover ratios which supposedly suggests an increasing dearth of buyers.

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ISM Spoils The Bond Rout!!!

2019-10-03

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2019-10-03

Federal Reserve Empire States Manu. Index, 2004-2019
With China closed for its National Day Golden Week holiday, the stage was set for Japan to steal the market spotlight. If only briefly. The Bank of Japan announced last night that it had had enough of the JGB curve. The 2s10s very nearly inverted last month and BoJ officials released preliminary plans to steepen it back out.

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Waiting on the Calvary

2019-09-26

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2019-09-26

WTO Global Trade, 2007-2019
Engaged in one of those protectionist trade spats people have been talking about, the flow of goods between South Korea and Japan has been choked off. The specific national reasons for the dispute are immaterial. As trade falls off everywhere, countries are increasingly looking to protect their own. Nothing new, this is a feature of when prolonged stagnation turns to outright contraction.

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No Longer Hanging In, Europe May Have (Been) Broken Down

2019-09-24

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2019-09-24

Central Bank Failure, 1999-2017
Mario Draghi can thank Jay Powell at his retirement party. The latter being so inept as to allow federal funds, of all things, to take hold of global financial attention, everyone quickly shifted and forgot what a mess the ECB’s QE restart had been. But it’s not really one or the other, is it? Once it actually finishes, the takeaway from all of September should be the world’s two most important central banks each botching their...

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What’s The Verdict On This Week?

2019-09-21

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2019-09-21

Money Markets Equivalents, 2009-2019
Jay Powell’s disastrous week is coming to a close, not yet his long nightmare. He has been battling fed funds (meaning repo) for his entire tenure dating back to February 2018. This week wasn’t the conclusion to the contest, just the latest and biggest round of it.

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Stuck at A: Repo Chaos Isn’t Something New, It’s The Same Baseline

2019-09-17

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2019-09-17

Money Markets Equivalent, 2017-2019
Finally, finally the global bond market stopped going in a straight line. I write often how nothing ever does, but for almost three-quarters of a year the guts of the financial system seemed highly motivated to prove me wrong. Yields plummeted and eurodollar futures prices soared. It is only over the past few weeks that rates have backed up in what has been the first real selloff since last year.

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A Bigger Boat

2019-09-11

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2019-09-11

Europe Industrial Production, 2013-2019
For every action there is a reaction. Not only is that Sir Isaac Newton’s third law, it’s also a statement about human nature. Unlike physics where causes and effects are near simultaneous, there is a time component to how we interact. In official capacities, even more so.

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Just Who Was The Intended Audience For The Rate Cut?

2019-09-07

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2019-09-07

Federal Reserve Beige Book, December 2010 - September 2019
Federal Reserve policymakers appear to have grown more confident in their more optimistic assessment of the domestic situation. Since cutting the benchmark federal funds range by 25 bps on July 31, in speeches and in other ways Chairman Jay Powell and his group have taken on a more “hawkish” tilt. This isn’t all the way back to last year’s rate hikes, still a pronounced difference from a few months ago.

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United States: The ISM Conundrum

2019-09-05

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2019-09-05

U.S. ISM Manufacturing PMI, Markit Manufacturing PMI and GDP, July 2012 - August 2019
Bond yields have tumbled this morning, bringing the 10-year US Treasury rate within sight of its record low level. The catalyst appears to have been the ISM’s Manufacturing PMI. Falling below 50, this widely followed economic indicator continues its rapid unwinding.

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Big Difference Which Kind of Hedge It Truly Is

2019-09-03

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2019-09-03

PCE Deflator, January 20 15 - July 2019
It isn’t inflation which is driving gold higher, at least not the current levels of inflation. According to the latest update from the Bureau of Economic Analysis, the Federal Reserve’s preferred inflation calculation, the PCE Deflator, continues to significantly undershoot. Monetary policy explicitly calls for that rate to be consistent around 2%, an outcome policymakers keep saying they expect but one that never happens.

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Monthly Macro Monitor: Market Indicators Review

2019-08-30

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2019-08-30

US 10 Year Treasury Yield Index, Sep 2017 - Aug 2019
The Treasury market continues to price in lower nominal and real growth. The stress, the urgency, I see in some of these markets is certainly concerning and consistent with what we have seen in the past at the onset of recession. The move in Treasuries is by some measures, as extreme as the fall of 2008 when we were in a full blown panic.

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Japan: Fall Like Germany, Or Give Hope To The Rest of the World?

2019-08-29

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2019-08-29

Japan JGB, Jan 2014 - Jul 2019
After trading overnight in Asia, Japan’s government bond market is within a hair’s breadth of setting new record lows. The 10-year JGB is within a basis point and a fraction of one while the 5-year JGB has only 2 bps to reach. It otherwise seems at odds with the mainstream narrative at least where Japan’s economy is concerned.

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Definitely A Downturn, But What’s Its Rate of Change?

2019-08-28

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2019-08-28

US Durable Goods Chicago Fed NAI, Jan 2006 - 2019
The Chicago Fed’s National Activity Index (NAI) fell to -0.36 in July. That’s down from a +0.10 in June. By itself, the change from positive to negative tells us very little, as does the absolute level below zero. What’s interesting to note about this one measure is the average but more so its rate of change.

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