Tag Archive: Bonds

Insane Repo Reminds Us

2019-01-04

It was only near the quarter end, that’s what made it so unnerving. We may have become used to these calendar bottlenecks over the years, but they still remind us what they are. Late October 2012 was a little different, though. On October 29, the GC repo rate for UST collateral (DTCC) surged to 52.6 bps. The money market floor, so to speak, was zero at the time and IOER (the joke) 25 bps. We also have to keep in mind the circumstances of that...

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Chart of the Week: The Dreaded Full Frown

2019-01-01

by Jeffrey P. Snider

2019-01-01

I’m going to break my personal convention and use the bulk of the colors in the eurodollar futures spectrum, not just the single EDM’s (June) contained within each. The current front month is January 2019, and its quoted price as I write this is 97.2475. The EDH (March) 2019 contract trades at 97.29 currently and it will drop off the board on March 18.

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Wasting the Middle: Obsessing Over Exits

2018-12-28

by Jeffrey P. Snider

2018-12-28

What was the difference between Bear Stearns and Lehman Brothers? Well, for one thing Lehman’s failure wasn’t a singular event. In the heady days of September 2008, authorities working for any number of initialism agencies were busy trying to put out fires seemingly everywhere. Lehman had to compete with an AIG as well as a Wachovia, already preceded by a Fannie and a Freddie.

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US Banks Haven’t Behaved Like This Since 2009

2018-12-14

by Jeffrey P. Snider

2018-12-14

Total Credit Market Assets 1953 Q1 - 2018 Q1

If there is one thing Ben Bernanke got right, it was this. In 2009 during the worst of the worst monetary crisis in four generations, the Federal Reserve’s Chairman was asked in front of Congress if we all should be worried about zombies. Senator Bob Corker wasn’t talking about the literal undead, rather a scenario much like Japan where the financial system entered a period of sustained agony – leading to the same in the real economy, one lost...

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Converging Views Only Starts With Fed ‘Pause’

2018-12-08

by Jeffrey P. Snider

2018-12-08

There’s no sign of inflation, markets are unsettled, and now new economic data keeps confirming that dark side. Forget each month, every day there is something else suggesting a slowdown. That much had been evident across much of the global economy, but this is now different. The US has apparently been infected, too, not that that is any surprise.

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Monthly Macro Monitor – November 2018

2018-11-30

by Joseph Y. Calhoun

2018-11-30

Is the Fed’s monetary tightening about over? Maybe, maybe not but there does seem to be some disagreement between Jerome Powell and his Vice Chair, Richard Clarida. Powell said just a little over a month ago that the Fed Funds rate was still “a long way from neutral” and that the Fed may ultimately need to go past neutral.

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Eurodollar Futures: Powell May Figure It Out Sooner, He Won’t Have Any Other Choice

2018-11-20

by Jeffrey P. Snider

2018-11-20

Eurodollar Futures Curve, May - Sep 2018

For Janet Yellen, during her somewhat brief single term she never made the same kind of effort as Ben Bernanke had. Her immediate predecessor, Bernanke, wanted to make the Federal Reserve into what he saw as the 21st century central bank icon. Monetary policy wouldn’t operate on the basis of secrecy and ambiguity. Transparency became far more than a buzzword.

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Monthly Macro Monitor – October 2018

2018-10-24

by Joseph Y. Calhoun

2018-10-24

Stocks have stumbled into October with the S&P 500 down about 6% as I write this. The source of equity investors’ angst is always hard to pinpoint and this is no exception but this correction doesn’t seem to be due to concerns about economic growth. At least not directly.

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A Few Questions From Today’s BOND ROUT!!!!

2018-10-05

by Jeffrey P. Snider

2018-10-05

On April 2, the benchmark 10-year US Treasury yield traded below 2.75%. It had been as high as 2.94% in later February at the tail end of last year’s inflation hysteria. But after the shock of global liquidations in late January and early February, liquidity concerns would override again at least for a short while. After April 2, the BOND ROUT!!!! was re-energized and away went interest rates.

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Monthly Macro Monitor – September

2018-09-20

by Marcelo Perez

2018-09-20

Economic Growth & Investment September 20

This has already been one of the longest economic expansions on record for the US and there is little in the data or markets to indicate that is about to come to an end. Current levels of the yield curve are comparable to late 2005 in the last cycle. It was almost two years later before we even had an inkling of a problem and even in the summer of 2008 – nearly three years later – there was still a robust debate about whether the US could avoid...

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Downslope CPI

2018-09-16

by Jeffrey P. Snider

2018-09-16

Cushing, OK, delivered what it could for the CPI. The contribution to the inflation rate from oil prices was again substantial in August 2018. The energy component of the index gained 10.3% year-over-year, compared to 11.9% in July. It was the fourth straight month of double digit gains.

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Illicit Arbitrage Cut by Tax Cuts and Jobs Act, Report 3 Sep 2018

2018-09-04

by Keith Weiner

2018-09-04

This week, we are back to our ongoing series on capital destruction. Let’s consider the simple transaction of issuing a bond. Party X sells a bond to Party Y. We will first offer something entirely uncontroversial. If the interest rate rises after Y buys the bond, then Y takes a loss. Or if the interest rate falls, then Y makes a capital gain. This is simply saying that the bond price moves inverse to the interest rate.

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‘Mispriced’ Bonds Are Everywhere

2018-09-02

by Jeffrey P. Snider

2018-09-02

The US yield curve isn’t the only one on the precipice. There are any number of them that are getting attention for all the wrong reasons. At least those rationalizations provided by mainstream Economists and the central bankers they parrot. As noted yesterday, the UST 2s10s is now the most requested data out of FRED. It’s not just that the UST curve is askew, it’s more important given how many of them are.

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Monthly Macro Monitor – August 2018

2018-08-17

by Joseph Y. Calhoun

2018-08-17

The Q2 GDP report (+4.1% from the previous quarter, annualized) was heralded by the administration as a great achievement and certainly putting a 4 handle on quarter to quarter growth has been rare this cycle, if not unheard of (Q4 ’09, Q4 ’11, Q2 & Q3 ’14). But looking at the GDP change year over year shows a little different picture (2.8%).

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Global Asset Allocation Update

2018-08-02

by Joseph Y. Calhoun

2018-08-02

The risk budget is unchanged again this month. For the moderate risk investor, the allocation between bonds and risk assets is evenly split. The only change to the portfolio is the one I wrote about last week, an exchange of TIP for SHY.

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Global Asset Allocation Update

2018-07-27

by Joseph Y. Calhoun

2018-07-27

Note: This will be a short update. We are shifting the timing of some of our reports. The monthly Global Asset Allocation update will now be published in the first week of the month, aiming for the first of each month. I’ll put out a full report next week. The Bi-Weekly Economic Review is shifting to a monthly update, published on the 15th of each month.

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Bi-Weekly Economic Review

2018-07-20

by Joseph Y. Calhoun

2018-07-20

This will be a fairly quick update as I just posted a Mid-Year Review yesterday that covers a lot of the same ground. There were, as you’ll see below, some fairly positive reports since the last update but the markets are not responding to the better data. Markets seem to be more focused on the trade wars and the potential fallout. I would also note that at least some of the recent strength in the data is related to the tariffs.

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Bi-Weekly Economic Review: As Good As It Gets?

2018-06-06

by Joseph Y. Calhoun

2018-06-06

In the last update I wondered if growth expectations – and growth – were breaking out to the upside. 10 year Treasury yields were well over the 3% threshold that seemed so ominous and TIPS yields were nearing 1%, a level not seen since early 2011. It looked like we might finally move to a new higher level of growth. Or maybe not.

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Bi-Weekly Economic Review: Growth Expectations Break Out?

2018-05-22

by Marcelo Perez

2018-05-22

There are a lot of reasons why interest rates may have risen recently. The federal government is expected to post a larger deficit this year – and in future years – due to the tax cuts. Further exacerbating those concerns is the ongoing shrinkage of the Fed’s balance sheet. Increased supply and potentially decreased demand is not a recipe for higher prices. In addition, there is some fear that the ongoing trade disputes may impact foreign demand...

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Global Asset Allocation Update

2018-05-17

by Joseph Y. Calhoun

2018-05-17

The risk budget changes this month as I add back the 5% cash raised in late October. For the moderate risk investor, the allocation to bonds is still 50% while the risk side now rises to 50% as well. I raised the cash back in late October due to the extreme overbought nature of the stock market and frankly it was a mistake. Stocks went from overbought to more overbought and I missed the rally to all time highs in January.

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