Tag Archive: rate hikes

Inversion Is The Real March Madness, Just Don’t Take It Literally

2022-03-22

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2022-03-22

With such low levels of self-awareness, it isn’t surprising that the FOMC’s members continue to pour gasoline on the already-blazing curve fire. March Madness is supposed to be on the courts of college basketball, instead it is playing out more vividly across all financial markets.

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The Fed Inadvertently Adds To Our Ironclad Collateral Case Which Does Seem To Have Already Included A ‘Collateral Day’ (or days)

2022-03-21

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2022-03-21

The Federal Reserve didn’t just raise the range for its federal funds target by 25 bps, upper and lower bounds, it also added the same to its twin policy tools which the “central bank” says are crucial to maintaining order in money markets thereby keeping federal funds inside the band where it is supposed to be. The FOMC voted to increase IOER from 15 bps to 40 bps, and the RRP from 5 bps to 30 bps.

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Media Attention All Over FOMC, Market Attention Totally Elsewhere

2022-03-19

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2022-03-19

The Federal Reserve did something today, or actually announced today that it will do something as of tomorrow. And since we’re all conditioned to believe this is the biggest thing ever, I’ll have to add my own $0.02 (in eurodollars, of course, can’t be bank reserves) frustratingly contributing to the very ritual I’m committed to seeing end.We shouldn’t care much about the Fed.

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Another One Inverts, The Retching Cat Reaches Treasuries

2022-03-15

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2022-03-15

As Alan Greenspan’s rate hikes closed in, longer-term Treasury yields were forced upward as the flattening yield curve left no more room for their blatant defiance. By mid-2005, though, the market wasn’t ready to fully price the downside risks which had already led to that worrisome curve shape (very flat). While all sorts of bad potential could be reasonably surmised, none of it seemed imminent or definite.

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Consumer Prices And The Historical Pain(s)

2022-03-12

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2022-03-12

The 1947-48 experience was truly painful, maybe even terrifying. The US and Europe had just come out of a decade when the worst deflationary consequences were so widespread that the period immediately following quickly erupted into the worst conflagration in human history.

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Houston, We Have An Oil (and inventory) Problem

2022-03-07

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2022-03-07

If only, like in the aftermath of the Apollo 13 explosion, we could just radio Houston to get started in figuring out just the way out of our fix. Mission Control would certainly buzz all the right people with the right stuff, summoning the best engineers and scientists from their quiet divans to the frenzied and dangerous work ahead.

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For The Fed, None Of These Details Will Matter

2022-03-06

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2022-03-06

Most people have the impression that these various payroll and employment reports just go into the raw data and count up the number of payrolls and how many Americans are employed. Perhaps the BLS taps the IRS database as fellow feds, or ADP as a private company in the same data business of employment just tallies how many payrolls it processes as the largest provider of back-office labor services.That’s just not how it works, though. In fact,...

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The Red Warning

2022-02-24

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2022-02-24

Now it’s the Russian’s fault. Belligerence surrounding Donbas and Ukraine, raw materials and energy supplies to Europe threatened by Putin’s coiled bear. Why wouldn’t markets grow worried?There’s always a reason why we shouldn’t take these things seriously, or quickly dismiss them out of hand as the temporary product of whichever political fear-of-the-day.

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After Today’s FOMC, Yield Curve Is Already As Flat As It Was In Mar ’18 **Without A Single Rate Hike Yet**

2022-01-28

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2022-01-28

It’s not hard to reason why there continues to be this conflict of interest (rates). On the one hand, impacting the short end of the yield curve, the unemployment rate has taken a tight grip on the FOMC’s limited imagination. The rate hikes are coming and the markets like all mainstream commentary agree that as it stands there’s nothing on the horizon to stop Jay Powell’s hawkishness.

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The Hawks Circle Here, The Doves Win There

2022-01-26

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2022-01-26

We’ve been here before, near exactly here. On this side of the Pacific Ocean, in the US particularly the situation was said to be just grand. The economy was responding nicely to QE’s 3 and 4 (yes, there were four of them by that point), Federal Reserve Chairman Ben Bernanke had said in the middle of 2013 it was becoming more than enough, creating for him and the FOMC coveted breathing space so as to begin tapering both of those ongoing programs.A...

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Good Time To Go Fish(er)ing Around The Yield Curve

2022-01-21

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2022-01-21

It should be as simple as it sounds. Lower LT UST yields, less growth and inflation. Thus, higher LT UST yields, more growth and inflation. Right? If nominal levels are all there is to it, then simplicity rules the interpretation. Visiting with George Gammon last week, he confessed to committing this sin of omission.

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Conflict Of Interest (rates): 10-year Treasury Yield Highest in Almost Two Years

2022-01-12

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2022-01-12

The dollar was high and going higher. Emerging markets had been seriously complaining. In one, the top central banker for India outright warned, “dollar funding has evaporated.” The TIC data supported his view, with full-blown negative months, net selling from afar that’s historically akin to what was coming out of India and the rest of the world.

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Taper Discretion Means Not Loving Payrolls Anymore

2022-01-10

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2022-01-10

When Alan Greenspan went back to Stanford University in September 1997, his reputation was by then well-established. Even as he had shocked the world only nine months earlier with “irrational exuberance”, the theme of his earlier speech hadn’t actually been about stocks; it was all about money.The “maestro” would revisit that subject repeatedly especially in the late nineties, and it was again his topic in California early Autumn ’97.

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As The Fed Tapers: What If More Rapid (published) Wage Increases Are Actually Evidence of *Deflationary* Conditions?

2022-01-05

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2022-01-05

Since the Federal Reserve is not in the money business, their recent hawkish shift toward an increasingly anti-inflationary stance is a twisted and convoluted case of subjective interpretation.

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This Is A Big One (no, it’s not clickbait)

2021-12-02

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2021-12-02

Stop me if you’ve heard this before: dollar up for reasons no one can explain; yield curve flattening dramatically resisting the BOND ROUT!!! everyone has said is inevitable; a very hawkish Fed increasingly certain about inflation risks; then, the eurodollar curve inverts which blasts Jay Powell’s dreamland in favor of the proper interpretation, deflation, of those first two.

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Inching Closer To Another Warning, This One From Japan

2021-07-20

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2021-07-20

UST Yield Curve, 2017-2019
Central bankers nearly everywhere have succumbed to recovery fever. This has been a common occurrence among their cohort ever since the earliest days of the crisis; the first one. Many of them, or their predecessors, since this standard of fantasyland has gone on for so long, had caught the malady as early as 2007 and 2008 when the world was only falling apart.

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Three (Rate Cuts) And GDP, Where (How) Does It End?

2019-11-01

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2019-11-01

The Real GDP Problem,1988-2018
The Federal Reserve has indicated that it will now pause – for a second time, supposedly. Remember the first: after raising its benchmark rates apparatus in December while still talking about an inflationary growth acceleration requiring even more hikes throughout 2019, in a matter of weeks that was transformed into a temporary suspension of them.

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What Does It Mean That Real Estate, Not Equities, Is Driving Monetary Policy?

2019-07-25

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2019-07-25

New Home Sales Population Adjusted, 1987-2019
In the world of assets classes, I don’t believe it is equities which hold the Federal Reserve’s attention. After the 2006-11 debacle, the big bust, you can at least understand why policymakers might be more attuned to real estate no matter how the NYSE trades. It may be a decade ago, but that’s the one thing out of the Global Financial Crisis which was seared into the consciousness of everyone who lived through it.

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Hall of Mirrors, Where’d The Labor Shortage Go?

2019-01-20

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2019-01-20

Federal Reserve Beige Book 2010-2019
Today was supposed to see the release of the Census Bureau’s retail trade report, a key data set pertaining to the (alarming) state of American consumers, therefore workers by extension (income). With the federal government in partial shutdown, those numbers will be delayed until further notice. In their place we will have to manage with something like the Federal Reserves’ Beige Book.

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Chinese Are Not Tightening, Though They Would Be Thrilled If You Thought That

2017-12-22

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2017-12-22

RMB Money, Jan - Dec 2017
The PBOC has two seemingly competing objectives that in reality are one and the same. Overnight, China’s central bank raised two of its money rates. The rate it charges mostly the biggest banks for access to the Medium-term Lending Facility (MLF) was increased by 5 bps to 3.25%. In addition, its reverse repo interest settings were also moved up by 5 bps each at the various tenors (to 2.50% for the 7-day, 2.80% for the 28-day).

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