Tag Archive: U.S. Treasuries

From QE to Eternity: The Backdoor Yield Caps

So, you’re convinced that low rates are powerful stimulus. You believe, like any good standing Economist, that reduced interest costs can only lead to more credit across-the-board. That with more credit will emerge more economic activity and, better, activity of the inflationary variety. A recovery, in other words. Ceteris paribus. What happens, however, if you also believe you’ve been responsible for bringing rates down all across the curve…and...

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No Flight To Recognize Shortage

If there’s been one small measure of progress, and a needed one, it has been the mainstream finally pushing commentary into the right category. Back in ’08, during the worst of GFC1 you’d hear it all described as “flight to safety.” That, however, didn’t correctly connote the real nature of what was behind the global economy’s dramatic wreckage. Flight to safety, whether Treasuries or dollars, wasn’t it.

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So Much Bond Bull

Count me among the bond vigilantes. On the issue of supply I yield (pun intended) to no one. The US government is the brokest entity humanity has ever conceived – and that was before March 2020. There will be a time, if nothing is done, where this will matter a great deal.That time isn’t today nor is it tomorrow or anytime soon because it’s the demand side which is so confusing and misdirected.

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The Fallen Kings & The Bond Throne of Collateral

There is no schadenfreude at times like these, no time to dance on anyone’s grave. Victory laps are a luxury that only central bankers take – always prematurely. The world already coming apart because of GFC1, what comes next with GFC2 and then whatever follows it? Another “bond king” has thrown in the towel.

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Fragile, Not Fortified

On Sunday, Argentina’s government announced it was postponing payment on any domestically-issued debt instruments denominated in foreign currencies. That means dollars, just not Eurobonds. At least not yet. In response, ratings agencies such as Fitch declared the maneuver a distressed debt exchange.In other words, technically a default.

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No Further Comment Necessary At This Point

I would write something snarky about bank reserves, but why bother at this point? It’s already been said. If Jay Powell doesn’t mention collateral, no one else does even though it’s the whole ballgame right now. Note: FRBNY’s updated figures shown below are for last week.

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Three Short Run Factors Don’t Make A Long Run Difference

There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to use in order to climb out of this mess have similarly narrowed.

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Is GFC2 Over?

Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either.

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(Almost) Everything Sold Off Today

The eurodollar curve’s latest twist exposes what’s behind the long end. To recap: big down day in stocks which, for the first time in a while, wasn’t accompanied by massive buying in longer maturity UST’s. Instead, these were sold, too. Rumors of parity funds liquidating were all over the place, which is consistent with this curve behavior.

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Low Rates As Chaos, Not ‘Stimulus’

Basic recession economics says that when you end up with too much of some commodity, too much inventory that you can’t otherwise sell, you have to cut the price in order to move it. Discounting is a feature of those times. What about a monetary panic? This might sound weird, but same thing.

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Like Repo, The Labor Lie

The Federal Reserve has been trying to propagate two big lies about the economy. Actually, it’s three but the third is really a combination of the first two. To start with, monetary authorities have been claiming that growing liquidity problems were the result of either “too many” Treasuries (haven’t heard that one in a while) or the combination of otherwise benign technical factors.

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The Greenspan Moon Cult

Taking another look at what I wrote about repo and the latest developments yesterday, it may be worthwhile to spend some additional time on the “why” as it pertains to so much determined official blindness, an unshakeable devotion to otherwise easily explained lunar events.

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Was It A Midpoint And Did We Already Pass Through It?

We certainly don’t have a crystal ball at the ready, and we can’t predict the future. The best we might hope is to entertain reasonable probabilities for it oftentimes derived from how we see the past. Which is just what statistics and econometrics attempt. Except, wherein they go wrong we don’t have to make their mistakes.

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US Sales and Production Remain Virus-Free, But Still Aren’t Headwind-Free

The lull in US consumer spending on goods has reached a fifth month. The annual comparisons aren’t good, yet they somewhat mask the more recent problems appearing in the figures. According to the Census Bureau, total retail sales in January rose 4.58% year-over-year (unadjusted). Not a good number, but better, seemingly, than early on in 2019 when the series was putting out 3s and 2s.

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Don’t Forget (Business) Credit

Rolling over in credit stats, particularly business debt, is never a good thing for an economy. As noted yesterday, in Europe it’s not definite yet but sure is pronounced. The pattern is pretty clear even if we don’t ultimately know how it will play out from here. The process of reversing is at least already happening and so we are left to hope that there is some powerful enough positive force (a real force rather than imaginary, therefore...

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History Shows You Should Infer Nothing From Powell’s Pause

Jay Powell says that three’s not a crowd, at least not for his rate cuts, but four would be. As usual, central bankers like him always hedge and say that “should conditions warrant” the FOMC will be more than happy to indulge (the NYSE). But what he means in his heart of hearts is that there probably won’t be any need.

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With No Second Half Rebound, Confirming The Squeeze

It’s a palpable impatience. Having learned absolutely nothing from the most recent German example, there’s this pervasive belief that if the economy hasn’t fallen apart by now it must be going the other way. The right way. Those are the only two options for mainstream analysis (which means it isn’t analysis).

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Manufacturing Clears Up Bond Yields

Yesterday, IHS Markit reported that the manufacturing turnaround its data has been suggesting stalled. After its flash manufacturing PMI had fallen below 50 several times during last summer (only to be revised to slightly above 50 every time the complete survey results were tabulated), beginning in September 2019 the index staged a rebound jumping first to 51.1 in that month.

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Everything Comes Down To Which Way The Dollar Is Leaning

Is the global economy on the mend as everyone at least here in America is now assuming? For anyone else to attempt to answer that question, they might first have to figure out what went wrong in the first place. Most have simply assumed, and continue to assume, it has been fallout from the “trade wars.”

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A Repo Deluge…of Necessary Data

Just in time for more discussions about repo, the Federal Reserve delivers. Not in terms of the repo market, mind you, despite what you hear bandied about in the financial media the Fed doesn’t actually go there. Its repo operations are more RINO’s – repo in name only. No, what the US central bank actually contributes is more helpful data.

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