Tag Archive: Federal Reserve/Monetary Policy

Where The Global Squeeze Is Unmasked

2019-09-17

Trade between Asia and Europe has dimmed considerably. We know that from the fact Germany and China are the two countries out of the majors struggling the most right now. As a consequence of the slowing, shipping companies have had to make adjustments to their fleet schedules over and above normal seasonal variances.

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

2019-09-17

by Jeffrey P. Snider

2019-09-17

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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Your Unofficial Europe QE Preview

2019-09-14

by Jeffrey P. Snider

2019-09-14

Eurodollar Futures Curve History, 2007-2019

The thing about R* is mostly that it doesn’t really make much sense when you stop and think about it; which you aren’t meant to do. It is a reaction to unanticipated reality, a world that has turned out very differently than it “should” have. Central bankers are our best and brightest, allegedly, they certainly feel that way about themselves, yet the evidence is clearly lacking.

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The Obligatory Europe QE Review

2019-09-13

by Jeffrey P. Snider

2019-09-13

If Mario Draghi wanted to wow them, this wasn’t it. Maybe he couldn’t, handcuffed already by what seems to have been significant dissent in the ranks. And not just the Germans this time. Widespread dissatisfaction with what is now an idea whose time may have finally arrived.

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Dollar (In) Demand

2019-09-12

by Jeffrey P. Snider

2019-09-12

The last time was bad, no getting around it. From the end of 2014 until the first months of 2016, the Chinese economy was in a perilous state. Dramatic weakness had emerged which had seemed impossible to reconcile with conventions about the country. Committed to growth over everything, and I mean everything, China was the one country the world thought it could count on for being immune to the widespread economic sickness.

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A Bigger Boat

2019-09-11

by Jeffrey P. Snider

2019-09-11

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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Is The Negativity Overdone?

2019-09-10

by Jeffrey P. Snider

2019-09-10

Give stimulus a chance, that’s the theme being set up for this week. After relentless buying across global bond markets distorting curves, upsetting politicians and the public alike, central bankers have responded en masse. There were more rate cuts around the world in August than there had been at any point since 2009.

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Just Who Was The Intended Audience For The Rate Cut?

2019-09-07

by Jeffrey P. Snider

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

by Jeffrey P. Snider

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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Copper Confirmed

2019-09-04

by Jeffrey P. Snider

2019-09-04

Copper prices behave more deliberately than perhaps prices in other commodity markets. Like gold, it is still set by a mix of economic (meaning physical) and financial (meaning collateral and financing). Unlike gold, there doesn’t seem to be any rush to get to wherever the commodity market is going. Over the last several years, it has been more long periods of sideways.

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Big Difference Which Kind of Hedge It Truly Is

2019-09-03

by Jeffrey P. Snider

2019-09-03

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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GDP Profits Hold The Answers To All Questions

2019-09-01

by Jeffrey P. Snider

2019-09-01

GDP Corporate Profits from Current Production, Jan 2010 - 2019

Revisions to second quarter GDP were exceedingly small. The BEA reduced the estimate by a little less than $800 million out of nearly $20 trillion (seasonally-adjusted annual rate). The growth rate therefore declined from 2.03502% (continuously compounded annual rate) to 2.01824%.

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

2019-08-29

by Jeffrey P. Snider

2019-08-29

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

by Jeffrey P. Snider

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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Germany’s Superstimulus; Or, The Familiar (Dollar) Disorder of Bumbling Failure

2019-08-24

by Jeffrey P. Snider

2019-08-24

The Economics textbook says that when faced with a downturn, the central bank turns to easing and the central government starts borrowing and spending. This combined “stimulus” approach will fill in the troughs without shaving off the peaks; at least according to neo-Keynesian doctrine. The point is to raise what these Economists call aggregate demand.

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That Can’t Be Good: China Unveils Another ‘Market Reform’

2019-08-20

by Jeffrey P. Snider

2019-08-20

The Chinese have been reforming their monetary and credit system for decades. Liberalization has been an overriding goal, seen as necessary to accompany the processes which would keep the country’s economic “miracle” on track. Or get it back on track, as the case may be. Authorities had traditionally controlled interest rates through various limits and levers.

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Some Brief European Leftovers

2019-08-18

by Jeffrey P. Snider

2019-08-18

Some further odds and ends of European data. Beginning with Continent-wide Industrial Production. Germany is leading the system lower, but it’s not all just Germany. And though manufacturing and trade are thought of as secondary issues in today’s services economies, the GDP estimates appear to confirm trade in goods as still an important condition and setting for all the rest.

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Retail Sales’ Amazon Pick Up

2019-08-17

by Jeffrey P. Snider

2019-08-17

The rules of interpretation that apply to the payroll reports also apply to other data series like retail sales. The monthly changes tend to be noisy. Even during the best of times there might be a month way off trend. On the other end, during the worst of times there will be the stray good month. What matters is the balance continuing in each direction – more of the good vs. more of the bad.

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US Industrial Downturn: What If Oil and Inventory Join It?

2019-08-16

by Jeffrey P. Snider

2019-08-16

Revised estimates from the Federal Reserve are beginning to suggest another area for concern in the US economy. There hadn’t really been all that much supply side capex activity taking place to begin with. Despite the idea of an economic boom in 2017, businesses across the whole economy just hadn’t been building like there was one nor in anticipation of one.

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The Path Clear For More Rate Cuts, If You Like That Sort of Thing

2019-08-15

by Jeffrey P. Snider

2019-08-15

If you like rate cuts and think they are powerful tools to help manage a soft patch, then there was good news in two international oil reports over the last week. The US Energy Information Administration (EIA) cut its forecast for global demand growth for the seventh straight month. On Friday, the International Energy Agency (IEA) downgraded its estimates for the third time in four months.

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