Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Monday, March 25, 2019
Real US National Debt Might Be $230 Trillion / Interest-Rates / US Debt
By: John_Mauldin
Trump has promised to free the US of debt. He pledged to pay all federal debt off in eight years.
But so far, it’s been just talk. Two years into Trump’s presidency, the US national debt has grown by $2 trillion.
The official, on-the-books federal debt is now at $22.1 trillion. $22.1 trillion is the face amount of all outstanding Treasury paper, including so-called “internal” debt.
It comes to about 105% of GDP, and that’s only the federal government.
Sunday, March 24, 2019
The Fed Follows Trump's Tweets, And Does The Right Thing / Interest-Rates / US Interest Rates
By: Steve_H_Hanke
Earlier this week, the Fed left its target Fed funds rate unchanged at 2.25-2.50%. In addition, the Fed indicated that it had turned dovish. Rather than two Fed funds rate hikes in 2019, the Fed has now signaled that there will be none. And that’s not all. Starting in May, the Fed will reduce its balance sheet unwind of its Treasury holdings to $15 billion per month from $30 billion, and that it will end the unwind in September.
All this dovishness must have warmed the cockles of President Trump’s heart. For some time, Trump has been targeting the Fed with Twitter storms that have complained that the Fed has been too hawkish.
Well, the Fed apparently saw what the President saw. Or, maybe not. After all, one line of argument used to support the Fed’s new dovish stance is that the stance is necessary given the uncertainties that abound—both at home and abroad (read: regime uncertainties being created by President Trump himself).
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Friday, March 22, 2019
Elliott Wave: Fed Follows Market Yet Again / Interest-Rates / US Interest Rates
By: EWI
By Steve Hochberg and Pete Kendall
Back in December, we wrote an article titled "Interest Rates Win Again as Fed Follows Market."
In the piece, we noted that while most experts believe that central banks set interest rates, it's actually the other way around—the market leads, and the Fed follows.
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Friday, March 22, 2019
Next Recession: Finding A 48% Yield Amid The Ruins / Interest-Rates / US Bonds
By: Dan_Amerman
In a previous analysis we examined how to create a 21% yield, as the incidental byproduct of the Fed's plans for the cyclical containment of recession.
In this analysis, we will deepen that examination and visually illustrate the financial mathematics that would create a potential 48% yield from what the Federal Reserve plans to do in the event of another recession.
This analysis is part of a series of related analyses, an overview of the rest of the series is linked here.
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Tuesday, March 19, 2019
US Overdosing on Debt / Interest-Rates / US Debt
By: Harry_Dent
On Friday, I talked about how the last 11 years have been no better than cumulative GDP during the Great Depression (1929-1940). I’ll talk more about that on Thursday. Today I want to point out the biggest difference between this Economic Winter Season and the one 80 years ago…That is: Central banks!
Thanks to their interference, our massive debt bubble didn’t deleverage as it should have!
Total debt peaked at $58.4 trillion, or four times GDP, in the first quarter of 2009 and just barely deleveraged in the financial and consumer sectors during the Great Recession.
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Sunday, March 17, 2019
This Is How You Create the Biggest Credit Bubble in History / Interest-Rates / Global Debt Crisis 2019
By: John_Mauldin
Last week, the ECB announced it would keep record-low interest rates for longer. The news comes shortly after the Fed gave in to the market and held off on further rate hikes.
While investors celebrate the policy reversal, they might soon regret it.
This stimulus may indeed buy the market an additional year or two. But postponing the inevitable downturn with artificially low rates will come at a cost.
The cost is a massive credit bubble that is already of biblical proportions. Its implications chill me to the bone.
Wednesday, March 13, 2019
US Federal Borrowing Crosses the Rubicon / Interest-Rates / US Debt
By: MoneyMetals
A year ago, Republicans in control of Congress suspended the cap on federal borrowing. The limit was automatically re-imposed on March 1st. Politicians now have a few months to hammer out legislation to raise the cap as the Treasury employs “extraordinary measures” to fend off default.
The federal deficit is mushrooming once again. The 2017 tax cuts have taken a bite out of receipts at the IRS and economic growth has not met expectations.
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Monday, March 11, 2019
The Fed Is Playing a Dangerous Game / Interest-Rates / US Federal Reserve Bank
By: John_Mauldin
Two months ago, Fed Chair Jerome Powell set off a market panic.
He suggested the FOMC would do what it thinks is right and let asset prices go where they may.
They promised at least two if not three more rate hikes in 2019. The stock market fell out of bed.
Fast forward to now. The Fed has given up its tightening dreams and might even loosen policy. It is even (gasp!) losing its fear of inflation.
The problem is that preventing small “crises” on a regular basis eventually causes a very large crisis.
Saturday, March 09, 2019
Unsecured Debt hits £15,400 per UK Household / Interest-Rates / UK Debt
By: Submissions
It has been revealed in statistics provided by the trade union body, the TUC, that unsecured debt in the UK has now reached a new high of £15,400 per British household. To compile its figures, the TUC compared the total amount of money lent in overdrafts, personal loans, payday loans, store cards, and credit card debts.
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Thursday, March 07, 2019
How Private Sector Debt Bubble Could Trigger the Next Financial Crisis / Interest-Rates / Financial Crisis 2019
By: MoneyMetals
The $22 trillion official national debt is a much discussed problem, even as politicians exhibit zero motivation to do anything about it. But as big an economic overhang as it is, government debt isn’t likely to trigger the next financial crisis.
Yes, servicing the growing federal debt bubble will depress GDP growth, cause the value of the dollar to drop, and raise inflation risks. But the bubble itself won’t necessarily burst – not anytime soon.
As long as politicians face no political consequences for deficit spending, and as long as the Federal Reserve keeps the Treasury bond market propped up… then many more trillions can be added to the national debt.
Thursday, March 07, 2019
What Comes After a Trillion in Student Debt? / Interest-Rates / Student Finances
By: Jared_Dillian
Headline in Bloomberg the other day:“Millennials Are Facing $1 Trillion in Debt.”
A trillion always sounds like a lot. It is a lot. But while the absolute number is large, that is not the issue.
The issue is what makes up this millennial debt. It’s mostly student loans, and a staggeringly high amount of these loans are in delinquency.
And this is at the top of an economic expansion!
On a societal level, imagine what happens if the economy takes a wrong turn and these student loans—which are already 10% delinquent—go to 40% delinquent?
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Saturday, March 02, 2019
Perception of Powell Put in Place – QE4 Looms / Interest-Rates / Quantitative Easing
By: EWI
By Murray Gunn
For better or worse, the markets perceive that Fed chairman Powell has showed his hand.
The recent Federal Open Markets Committee (FOMC) minutes of the January meeting revealed almost unanimous agreement to announce a plan soon for ending the Fed's policy of balance sheet reduction. This is the first step in an inevitable march towards the fourth round of quantitative easing (QE4).
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Friday, March 01, 2019
US Consumer Debt Is Actually in Better Shape Than Ever / Interest-Rates / US Debt
By: Jared_Dillian
I saw a headline last week:
“More Americans Are Behind On Their Car Loans Than Ever Before”
Sounds ominous. It’s even worse when you dig into it.
Seven million car loans were more than 90 days past due in the fourth quarter of last year. That’s more than during the Great Recession, when unemployment was twice as high.
A lot of the perma-bears seized on this, saying how the economy sucks because everyone is defaulting on their car loans.
Thursday, February 28, 2019
Next Recession: Turning Zero Percent Interest Rates Into A 21% Yield / Interest-Rates / US Interest Rates
By: Dan_Amerman
If there is a new recession in the next few years, then it is highly likely that the Federal Reserve will take extreme measures in response, with the primary response being to swiftly knock short term interest rates back down to zero percent.
For many investors - the combination of recession, heavy-handed Fed interventions, and the return of zero percent interest rate policies (ZIRP) is likely to produce devastating results for their portfolios, and possibly their standard of living in retirement.
At the same time - some quite attractive profit opportunities will also exist, once we learn how to see them. This analysis explores one reasonably simple and practical alternative for turning zero percent interest rates into a 21% annual return.
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Monday, February 25, 2019
Fed Repo Man’s Valentine’s Day Present / Interest-Rates / US Interest Rates
By: Michael_Pento
The New York Federal Reserve recently sent out an early Valentine’s Day present to a certain group of individuals. However, this gift wasn’t to overleveraged American consumers; but rather to those who are employed repossessing one of those goodies they can’t afford. On February 12th the NY Fed made the announcement that a record number of consumers are falling behind on their car payments. There are now over 7 million car loans past due by at least 90 days as of Q4 2018, along with a record 89 million loans that are outstanding. For Subprime Auto borrowers with credit scores below 620, the delinquency rate spiked to over 16% and the number of subprime borrowers jumped to 20% of loans outstanding. The amount of overdue loans has spiked by 1.3 million since its previous high set in 2011, when the unemployment rate was at 9%.
Friday, February 22, 2019
US Auto Loans - Americans Missing Car Payments Is a Symptom of a Much Bigger Problem / Interest-Rates / US Debt
By: John_Mauldin
By Robert Ross Transportation is a big issue in most of the US.
It’s so big that for the majority of Americans having a car is a matter of survival. Most people can’t even go to work without a car.
That makes auto payments a high priority. And yet, the number of people who can’t make them is rising fast.
Last week, the Fed warned that auto delinquencies—or missed payments on auto loans—are on a steep rise.
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Friday, February 22, 2019
This Money-Destroying Policy Could Soon Become a Reality / Interest-Rates / Quantitative Easing
By: John_Mauldin
It was my first encounter with what I thought was economic insanity.
More than 10 years ago, I came across the ideas of economist Bill Mitchell of the University of Newcastle in New South Wales.
He was teaching what he called Modern Monetary Theory (MMT). I looked into it and quickly dismissed it as silly.
Actually printing money as an economic policy? Get serious.
Fast forward to today, the idea is adopted by new socialist-like movements in the US and abroad. It’s cited by politicians and mainstream media.
There’s a growing number of rationales for adopting MMT into our philosophical base.
Thursday, February 21, 2019
QE Forever: The Fed's Dramatic About-face / Interest-Rates / Quantitative Easing
By: Ellen_Brown
“Quantitative easing” was supposed to be an emergency measure, but the Federal Reserve is now taking a surprising new approach toward the policy. The Fed “eased” shrinkage in the money supply due to the 2008-09 credit crisis by pumping out trillions of dollars in new bank reserves. After the crisis, the presumption was the Fed would “normalize” conditions by sopping up the excess reserves through “quantitative tightening” (QT)—raising interest rates and selling the securities it had bought with new reserves back into the market.
Monday, February 18, 2019
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble / Interest-Rates / Corporate Bonds
By: John_Mauldin
By Robert Ross : “Housing prices in the US never go down.”
Just about everyone in America believed that in the mid-2000s.
A limited amount of buildable land and a growing population would keep housing demand strong.
So, house prices will continue to rise.
That was the thinking, anyway.
Even some of America’s brightest minds—like former Federal Reserve Chairman Alan Greenspan—jumped on the stable housing bandwagon.
Monday, February 18, 2019
Stacking The Next QE On Top Of A $4 Trillion Fed Floor / Interest-Rates / Quantitative Easing
By: Dan_Amerman
The Federal Reserve is currently communicating to the markets that it will likely pivot, and pause two strategies. The first pivot is to stop increasing interest rates. The second pivot is to stop unwinding the Fed balance sheet.
While the interest rate pause is getting the most attention - the balance sheet pause could be the most important one for investors over the coming years.
As explored herein, the impact of pausing the unwinding the balance sheet is to create a new floor at about $4 trillion in Federal Reserve assets. And if the business cycle has not been repealed and there is another recession - the Fed fully intends to go back to quantitative easing, potentially creating more trillions of dollars to be used for market interventions, and to stack another round of balance sheet expansion right on top of the previous round.
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