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Market Oracle FREE Newsletter

Analysis Topic: Interest Rates and the Bond Market

The analysis published under this topic are as follows.

Interest-Rates

Thursday, May 10, 2007

Credit Collapse - May 10th / Interest-Rates / Credit Crunch

By: Paul_Lamont

On May 10 th 1837 , the banks of New York suspended gold and silver payments for their notes. Fear ignited bank runs throughout the United States . The young country fell into a 7 year depression. How could two decades of prosperity end so suddenly? According to America : A Narrative History : “monetary inflation had fueled an era of speculation in real estate, canals, and railroad stocks.” Cracks in the dam were visible much earlier, as the stock market peaked in inflation-adjusted value three years prior. According to Rolf Nef, debt levels in the private sector rose to 150% of GDP. In late 1836, the Bank of England concerned with inflation raised interest rates. As rates rose in England , credit tightened, and U.S. asset prices began to fall.

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Interest-Rates

Thursday, May 10, 2007

Bank of England Raises UK Interest Rates by 0.25% to 5.5% / Interest-Rates / UK Interest Rates

By: Sarah_Jones

As widely expected UK interest rates have been raised to 5.5% at mid-day today.

In a statement the Bank of England stated :

The Bank of England's Monetary Policy Committee today voted to raise the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.

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Interest-Rates

Wednesday, May 09, 2007

UK Interest Rates Expected to Rise to 5.50% Tomorrow / Interest-Rates / UK Interest Rates

By: Nadeem_Walayat

The rise in UK interest rates to the interim target of 5.50% is expected to occur at mid-day tomorrow. The rises in interest rates towards the Market Oracle target of 5.75% by Sept 2007 are a consequence of the Bank of England failing to control inflation.

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Interest-Rates

Monday, April 30, 2007

The Bernanke Bluff on US Interest Rates / Interest-Rates / US Interest Rates

By: Paul_Petillo

Ben Bernanke, the Federal Reserve chairman seems to be holding his ground when it comes to short-term interest rates – at least in the short-term. His recent testimony before the Congressional Joint Economic Committee offered no additional insight into how the chairman thinks. His testimony before legislators offered no hint as to what he would do with rates in light of some troubling economic news.

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Interest-Rates

Sunday, April 22, 2007

UK Interest Rates to Rise to 5.50% on May 10th , What's Next ? / Interest-Rates / UK Interest Rates

By: Nadeem_Walayat

The money markets have now priced in a rise in interest rates to 5.50% at the May meeting of the Bank of England's Monetary Policy Committee.

In my previous article I discussed the reasons why interest rates have been on the rise during 2007 towards the target of 5.75% (British Pound Finally Awakens to Inflation feeding Rising UK Interest Rates 18th April 07)

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Interest-Rates

Wednesday, April 18, 2007

British Pound Finally Awakens to Inflation feeding Rising UK Interest Rates / Interest-Rates / UK Interest Rates

By: Nadeem_Walayat

Inflation as measured by the CPI jumped above 3% to 3.1%, which now virtually guarantees a hike in UK interest rates to 5.5% at Mays Bank of England MPC Meeting. The British Pound surged through the $2.00 barrier, having flirted with it for nearly 2 years now, each attempt at a break having held, but no more !

Both the rise to 5.50% at the May meeting and the Pounds jump above $2.00 have been long forecast and expected.

The Story of 2007 has been and will continue to be of higher interest rates across the world. Not just for the UK but for most major economies. The resulting effect is already being seen in the currency markets with a selling of the US dollar especially against the Euro and Sterling.

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Interest-Rates

Wednesday, April 11, 2007

Further Hikes in US Interest Rates Possible - But Gold Just Doesn't Buy It. / Interest-Rates / Gold & Silver

By: Adrian_Ash

"...The price of gold, US consumers and the International Monetary Fund all 
agree the US economy is about to slow down dramatically.."

SO FURTHER HIKES in US interest rates could still "prove necessary" according to Ben Bernanke and his team.

Stocks and bonds sold off hard Wednesday on the release of minutes from last month's Fed policy meeting. "They still have their finger on the trigger for raising interest rates," reckons one US fund manager running $23 billion in Los Angeles speaking to Bloomberg in between watching his portfolio wobble.

But gold, on the other hand, just doesn't buy it. Spot gold prices continued to trade in a tight range around $676.50 per ounce. Gold also held steady against the other major currencies, remaining near 6-week highs versus Sterling, the Euro and Japanese Yen.

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Interest-Rates

Tuesday, April 10, 2007

Bank of Japan keeps Japanese Interest Rates on hold at 0.50% / Interest-Rates / Japanese Interest Rates

By: Sarah_Jones

The Bank of Japan kept interest on hold at 0.50%, following last Februarys hike from 0.25%.

This follows recent data which showed that inflation (CPI) fell in February to 0.1%, which again raised the specter of deflation that Japan has suffered from since the early 1990's property bubble collapse.

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Interest-Rates

Saturday, April 07, 2007

Currency traders hated this week's vote by the Bank of England. But UK savers will hate it more... / Interest-Rates / UK Interest Rates

By: Adrian_Ash

SO THE BANK of ENGLAND voted to keep Sterling interest rates on hold for another month.

Ahead of the decision, the futures market had put the chances of a further baby-step increase to 5.50% at around fifty-fifty. That would have taken Sterling rates above US Dollar rates for the first time since March last year.

History says that an interest-rate premium for Sterling tends to reward currency speculators with a capital gain, as well as a positive pay-off from the carry. And so, anticipating a hike by the Old Lady, the foreign exchange market got itself increasingly long of Sterling over the last five trading sessions.
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Interest-Rates

Thursday, April 05, 2007

BOE Keeps UK Interest Rates on Hold in April But likely to Rise in May / Interest-Rates / UK Interest Rates

By: Victoria_Marklew

As expected, the Bank of England's (BoE) Monetary Policy Committee (MPC) left its policy repo rate unchanged at 5.25% this morning. However, as we've noted before (see Daily Global Commentary, March 21: UK: Rate Hike Expectations Ease but Don't Rule Out Further Tightening ), the BoE concluded in its February Inflation Report that inflation would be slightly above the 2.0% target in two years' time if the repo rate stayed at 5.25%. Given the members' concerns about underlying inflation pressures and about an increase in firms' pricing power, recent data suggest the odds still favor another rate hike in May.

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Interest-Rates

Thursday, April 05, 2007

A Fixed Interest Income Bond Market Shock Looms / Interest-Rates / US Interest Rates

By: Michael_Pento

First it was the NASDAQ stocks in 2000, then real estate prices, and now the third leg of this asset price correction is at the threshold. Recent salvos from China and our own commerce secretary may be the catalysts for this correction.

We have been in a multi-decade bull market in bond prices. From September of 1981 to June of 2003 the yield on the two year Treasury note fell from 16.46% to 1.23%. Likewise from October '81 through June '05 the 30 year bond has declined from 14.68% to 4.29%. Since then, the two and thirty year yield has risen to 4.5% and 4.85% respectively. According to Bloomberg, treasuries are now 1.56 percentage points lower than the 6.21% average of the past 20 years. That means even if you discard the high rates of a quarter century earlier into your calculation, treasuries yields are still about 32% below average!

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Interest-Rates

Wednesday, April 04, 2007

Derivatives Trading Disasters - From LTCM to the 'Ohio Put' in nine years of easy money... / Interest-Rates / Money Supply

By: Adrian_Ash

THIRTEEN YEARS AGO , the giant German industrial conglomerate Metallgesellschaft lost $1.5 billion trading crude oil futures.

It admitted afterwards that it knew little-to-nothing about the oil market.

The next year, in 1995, Barings bank – one of Britain's oldest and most respected financial institutions – went bust thanks to a lone trade in Singapore losing some $860 million on Japanese stock futures.

The head office in London claimed it knew nothing about Nick Leeson's repeated strategy of 'double or quits'.

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Interest-Rates

Monday, April 02, 2007

Nolte Notes - What if ? Trade War with China ?, War with Iran ? Still expect lower US interest rates / Interest-Rates / US Interest Rates

By: Paul_J_Nolte

Former Speaker of the House, Tip O'Neil said that all politics is local. However, today the focus is trained upon everywhere but within our boarders. The hostage “situation” in Iran, the rumblings of protection legislation directed at China as well as the ongoing debate about the war in Iraq. What we need is a good debate about a new stop light in the middle of town! The impact upon the financial markets has been to take their eyes off the economy and play many “what-if” games – what if the hostage crisis lingers in Iran, what will be the impact upon our oil supply.

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Interest-Rates

Saturday, March 31, 2007

Draw the Yield Curve, Then Plot the Data / Interest-Rates / Inverted Yield Curve

By: John_Mauldin

This week we look at something which has far more potential to hurt the economy than subprime loans - the US Congress. We muse on inflation data and why the economy may do better than I think.

Let's start with a question from reader Dr. Rick Simon Associate Professor of Mathematics of the University of La Verne. After some very nice comments, he threw in the zinger:

"That said, however, you've gone far into the 'draw the curve, then plot the data' mentality this time. It wasn't enough to 'spin' the data the way you want it; for example, by citing only the Fed's Moskow and ignoring Bernanke and others. You actually state, 'Fewer buyers and those losing their homes will mean more rentals. That means rent prices will go up.' Please do explain how more rentals on the market will cause rent prices to go up."

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Interest-Rates

Friday, March 30, 2007

Sweden's Interest Rates Expected to Rise Faster than Expected / Interest-Rates / Euro-Zone

By: Victoria_Marklew

As expected, the Riksbank today left its key repo rate at 3.25% and struck the same relativelydovish tone that it adopted after February's 25bp rate hike. The bank once again noted that, "over the coming months the repo rate will need to be raised by 0.25 percentage point ...

After that it will probably be possible to pause before making a further increase." The bank published its rate path forecast for the first time in February, indicating that it expected the repo rate to be at 3.5% by the end of this year, nudging upward to average 3.6% in Q1 2008 and 3.7% in Q1 2009. However, we think the path of tightening will end up being a little steeper.

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Interest-Rates

Thursday, March 29, 2007

Cross Currents For US TBonds and Interest Rates / Interest-Rates / US Interest Rates

By: Jim_Willie_CB

Volatility for US Treasury Bonds has risen markedly in the last several months. A rise in such bond yields creates a favorable background for gold prices. A fall in such bond yields leads to strong competition for gold as safe haven, in a manner which actually supports the USDollar.

Gold takes great advantage of rising bond yields. Cross currents point to both higher yields and lower yields, thus more volatility. Uncertainty abounds.

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Interest-Rates

Tuesday, March 27, 2007

Robust German and Still-Firm Euro-zone Economic Growth Add Up To June ECB Interest Rate Hike / Interest-Rates / Euro-Zone

By: Victoria_Marklew

After faltering a little in January and February, German business morale recovered smartly this month, with the Ifo business sentiment index rising to 107.7 from 107.0 the month before. The current conditions index recovered to 112.4 from 111.6 while the business expectations index rose back to 103.2 from 102.6 the month before. All told, German businesses appear to be recovering more quickly than expected from the three percentage point hike in the VAT rate that took effect at the start of the year.

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Interest-Rates

Monday, March 26, 2007

UK strong house price growth signals further rises in interest rates / Interest-Rates / UK Housing

By: Nadeem_Walayat

Hometrack revealed house prices in the UK surged in March to take the annualised rate to 6.7% from 6.4%. With the likelyhood of further strengthening as the market moves into a traditionally stronger housing market demand period going into the summer. London experienced an even stronger growth of 1.8% due to the boom in the financial services industry, which provided a lift to the overall UK figures.

This confirms my expectations of further interest rate rises during 2007 towards our target of 5.75%, (UK Interest Rates could rise to 5.75% in 2007) - Nov 06. The expectation is now for the next rise in interest rates to come in a little over a months time at the May 2007 Bank of England MPC Meeting. A rise in April is highly unlikely, given the soft tone amongst the MPC members who voted 8-1 to keep interest rates on hold, with 1 vote for a cut.

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Interest-Rates

Thursday, March 22, 2007

Fed Signalling US Interest Rate Cuts that may Not happen / Interest-Rates / US Interest Rates

By: Peter_Schiff

Don't Uncork the Champaign Just Yet - By omitting a few key words from their most recent statement, the Fed led Wall Street to the premature conclusion that the next move in interest rates will be down. With the economy clearly headed for recession, there is no doubt that the Fed would like nothing more than to do just that. However, given that it wants to pretend otherwise, and considering the damage it would do to the already shaky U.S. dollar, an actually rate cut seems highly suspect.

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Interest-Rates

Monday, March 19, 2007

The Inverted Yield Curve - Is It Really Different This Time? / Interest-Rates / Inverted Yield Curve

By: Paul_L_Kasriel

One of the components of the index of Leading Economic Indicators is the spread between the 10-year nominal Treasury yield and the federal funds rate (hereafter referred to as "the spread"). When the spread is widening, it is thought to be a harbinger of faster future real economic growth; when the spread is narrowing, it is thought to be a harbinger of slower future real economic growth. When the spread becomes negative, or the yield curve inverts, a necessary condition of a recession occurs.

That is, every recession starting with the one in 1970 has been preceded by a negative yield spread (See Chart 1, in which the shaded vertical areas represent recessions). However, there has been one occasion since the recession of 1970 when the yield spread turned negative and a recession did not occur. That was in the summer of 1998 at the time of the Long-Term Capital Markets arbitrage fund meltdown. The pace of economic activity slowed at this time and the Federal Reserve quickly dropped the fed funds rate by 75 basis points, perhaps forestalling a recession.

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