Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Monday, February 07, 2022
Powell the Pivoter Cannot Now Pivot Back to a Dove / Interest-Rates / US Interest Rates
By: Michael_Pento
The current Fed Chair is perhaps best known for his quick pivots from hawkish back to dovish and vice versa. Maybe he is just too dependent on the prevailing winds of the current economic data. Or, perhaps more accurately, he is most swayed by the performance of the stock market. In either case, Jerome Powell received more reasons to become hawkish just one day following his already hawkish FOMC press conference.
The Bureau of Economic Analysis reported Q4 2021 GDP growth at a 6.9% SAAR. This is a big problem for the Fed, since it falsely believes inflation comes from an economy that is growing too fast. Add in the 7% CPI print for December, and you have a Fed that now understands it is far behind the inflation curve and it's time to pivot towards an even tighter monetary policy stance. Nevertheless, the FOMC fails to grasp the rapid growth and inflation was engendered by unprecedented fiscal and monetary stimulus, which has now gone in reverse.
Sunday, February 06, 2022
New US National Debt Milestone Signals Currency Crisis Ahead / Interest-Rates / US Debt
By: MoneyMetals
The U.S. reached a $30 trillion milestone this week. Instead of signifying a great achievement, though, it serves as a dire warning for American workers, investors, and retirees.
On Tuesday, the Treasury Department reported that total public debt outstanding surpassed $30,000,000,000,000.
That’s a lot of zeroes. It amounts to $231,000 per household.
Interest on the debt currently costs taxpayers $900 million per day, or $330 billion per year. Enormous as that sum may seem, it is artificially low at present due to depressed interest rates.
Monday, December 27, 2021
Will Santa Give Us Interest Rate Hikes for 2022? / Interest-Rates / US Interest Rates
By: P_Radomski_CFA
If the Fed normalizes its balance sheet and markets freak-out, it will be a bridge too far. But interest rate hikes won’t crash a strong US economy.
With Fed officials increasingly hawked up, the narrative shifted from a tapering of asset purchases to potential interest rate hikes. And now, with whispers of the Fed plotting to normalize its balance sheet, questions have arisen over the potential impact on the PMs.
To explain, I wrote on Dec. 20:
After admitting that inflation “is alarmingly high, persistent, and has broadened to affect more categories of goods and services,” Waller implored the Fed to sell some of its bond holdings.
For context, tapering means that bonds are purchased at a slower pace or not at all. However, even zero purchases result in the Fed’s nearly $8.76 trillion in bond holdings remaining constant. Conversely, if the Fed reduces its balance sheet by selling bonds to private investors, it’s akin to a taper on steroids. Waller said:
“If we start doing some balance sheet runoff by summer, that’ll take some pressure off, you don’t have to raise rates quite as much. My view is we should start doing that by summer.”
Monday, December 20, 2021
Fed WAY behind Curve, Real Rates to Remain Deeply Negative / Interest-Rates / US Interest Rates
By: MoneyMetals
As the Federal Reserve prepares to taper its asset purchases, investors are preparing to adjust their portfolios.
Some are dumping gold. They could be making a big mistake.
Sentiment toward precious metals turned negative as prices fell over the past few weeks. Gold and silver markets continued to slide ahead of the Federal Reserve’s policy meeting on Wednesday.
However, they got a bounce following the Fed’s announcement that it would double the pace of tapering in 2022 and raise interest rates up to three times.
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Saturday, December 18, 2021
Fed Interest Rate Actions 1999 to Present – Stock Market What’s Next? / Interest-Rates / Financial Markets 2021
By: Chris_Vermeulen
Let’s continue to explore the past 20 years of US Fed actions. I believe the US Fed has created a global expansion of both economies and debts/liabilities that may become somewhat painful for foreign nations – and possibly the US.
Reading The Data & What To Expect in 2022 And Beyond
In the first part of this research article, I highlighted the past 25 years of US Fed actions related to the DOT COM bubble, the 9/11 terrorist attack, the 2008-09 US Housing/Credit crisis, and the recent COVID-19 virus event. Each time, the US Federal reserve had attempted to raise interest rates before these crisis events – only to be forced to lower interest rates as the US economy contracted with each unique disruption. The US Fed was taking what it believed were necessary steps to protect the US economy and support the global economy into a recovery period.
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Wednesday, December 15, 2021
US Fed Interest Rate Actions 1999 to Present – What’s Next? / Interest-Rates / US Interest Rates
By: Chris_Vermeulen
I find it interesting that so much speculation related to the US Federal Reserve drives investor concern and trends. In my opinion, the US Federal Reserve has been much more accommodating for the global economy after the 2008-09 US Housing Market crash. The new US Bank Stress Tests and Capital Requirements have allowed the US to move away from risk factors that may currently plague the global markets. What do I mean by this statement?
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Tuesday, December 07, 2021
US Bonds Yield Curve is not currently an inflationist’s friend / Interest-Rates / US Bonds
By: Gary_Tanashian
The yield curve is flattening
I don’t cheer-lead a given view, but if I were to do that I’d be cheering for a yield curve flattener to put a correction to inflationist dogmatists quoting von Mises to the herds and otherwise sloganeering about inflation and a “commodity super cycle” (that term is pure promo).
Well, the curve is flattening.
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Thursday, November 11, 2021
Interest Rate Normalization is Impossible / Interest-Rates / US Interest Rates
By: Michael_Pento
Stagflation is undermining the U.S. economy, and that poses a huge problem for Mr. Powell and his merry band of money printers.Inflation is running at a pace that is just about 3x faster than real GDP growth--a figure the Fed can no longer ignore. This is why Mr. Powell had no choice but to announce at November's FOMC press conference that the Fed would reduce its purchases of MBS and Treasuries by $15 billion each month starting this month. Therefore, officially pushing the economy further towards the edge of the monetary cliff. Meaning, the amount of new monetary creation will go from a record $120 billion per month to zero by the middle of 2022.
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Saturday, October 09, 2021
When Will the Fed Taper? / Interest-Rates / US Interest Rates
By: The_Gold_Report
In this review of the quarter, Adrian Day, founder of Adrian Day Asset Management, discusses the Federal Reserve's asset purchases, its talk of tapering them, and what that could mean for the broader markets.
To taper or not to taper, that is the question. So far, the Federal Reserve’s constant talk and threats of an impending taper have performed the job better than actually doing anything. Stocks are flat, gold is down, as are bonds. But markets are beginning to grow weary of the constant threats with no action. When the Fed actually starts to taper, we may see markets turn. It was a poor quarter in most major markets and assets.
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Thursday, October 07, 2021
Here's What Really Sets Interest Rates (Not Central Banks) / Interest-Rates / US Interest Rates
By: EWI
See "powerful evidence that the Fed is not in control of interest rates"
Most everyone is familiar with the phrase: "Keep your eye on the ball," which of course means -- focus on what really matters.
Those who seek clues about the direction of interest rates believe the "ball" is their nation's central bank.
For example, in the U.S., Federal Reserve announcements are the subject of countless financial headlines, like this one from Sept. 22 (Reuters):
Fed signals bond-buying taper coming 'soon,' rate hike next year
The assumption in most of these headlines is that the central bank determines the direction of rates.
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Monday, September 27, 2021
The U.S. Government Plans to Default on Debt the Dishonest Way / Interest-Rates / US Debt
By: MoneyMetals
Debt troubles in China and Washington, D.C. helped boost safe-haven demand for precious metals early this week. By Thursday, however, investors piled back into stocks and sold safe havens like gold and silver again.
Platinum is making news for an unusual reason that has nothing to do with its primary demand sources in the automotive and jewelry industries. Instead, it has to do with the political fight over raising the debt ceiling.
Some Democrats are proposing that the Treasury Department issue a $1 trillion platinum coin as a way around the need to increase borrowing capacity.
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Monday, August 30, 2021
Fed Chairman Doubles Down on Loose Money as Inflation Rages / Interest-Rates / US Federal Reserve Bank
By: MoneyMetals
Precious metals markets are rallying on some early Friday remarks from Jerome Powell. The Federal Reserve chairman is speaking at the Jackson Hole virtual gathering of central bankers Friday and Saturday, and he started off by emphasizing the view that high inflation readings will come down soon.
There is still a question of whether anything has changed since the last Fed policy meeting. There, Fed officials had suggested they may soon begin tapering their asset purchases.
Something that could give the Fed’s money masters an excuse to back down on tapering is the recent global surge in COVID cases linked to the Delta variant.
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Sunday, August 29, 2021
Jackson Hole Ahead! What Should We Expect? / Interest-Rates / US Interest Rates
By: Arkadiusz_Sieron
Gold prices fluctuate around $1,800, waiting for signals from the Fed at Jackson Hole. Which way will we go after the conference?Finally! The price of gold returned above $1,800 this week, as the chart below shows. It’s a nice change after the slide in early August. Although gold has rebounded somewhat, bulls shouldn’t open the champagne yet. A small beer would be enough for now, as the yellow metal already retreated from $1,800 on Wednesday (the fact that gold was unable to stay above this level is rather disappointing).
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Wednesday, August 25, 2021
Why Expectations for Fed Tightening Are Misplaced / Interest-Rates / US Interest Rates
By: MoneyMetals
Stimulus addicted markets ran into headwinds last week. Fed watchers found some hints about interest-rate tightening in the just-released FOMC’s July meeting minutes. That was all it took to rattle Wall Street.
Stocks have since recovered some of the initial losses, but it looks like history is about to repeat.
The U.S. economy is largely a mirage based on stimulus. Without artificially low interest rates, bond purchases (aka debt monetization), repo market support, and other extraordinary measures the central planners put in place, stock prices would fall.
There was a stock market correction in the fall of 2018 after which the Fed reversed course on tightening. And when COVID struck in March of 2020, the Fed quickly surrendered – cutting the funds rate all the way back to zero.
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Sunday, August 22, 2021
Top Three Biggest Mistakes Made By Options Traders / Interest-Rates / Options & Warrants
By: Chris_Vermeulen
I have been trading options and coaching / mentoring new options traders for years. I have seen new traders who were blindly successful and others who were so frustrated on the verge of giving up, I have seen it all. Over the years, I have seen some very common themes among all traders, especially with options. Options trading can be very rewarding but it is not as easy as buying and selling stocks. There are many more factors and variables you must take into consideration when trading options especially if you are swing trading them or holding them for an extended period of time.
There is a certain skill it requires that is a mix of technical, statistical, and fundamental analysis. These are not skills everyone has and you have to master all three if you want to be a really successful trader. I have noticed stock traders tend to have a good amount of fundamental and technical skills but usually lack in the statistical area. This can cause a problem when it comes to their success. While trading stocks, this might be a great formula that works but when switching to options it could be a losing formula. Many traders don’t know where they went wrong.
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Monday, August 16, 2021
US Bond Market Long-term Trend / Interest-Rates / US Bonds
By: Nadeem_Walayat
The screeching that one hears from the likes of Michael "Big Short" Burry is that the US Bond market is about to collapse. We'll all I can see when looking at the long-term chart is that since the pandemic panic bond market spike of March 2020, bonds have been in a correction against it's primary bull trend, and that correction appears to have ENDED.
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Friday, July 30, 2021
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory / Interest-Rates / US Bonds
By: Arkadiusz_Sieron
The bond yields dropped despite surging inflation. It’s not a usual thing on the market, so we have to ask: what does it mean for gold?The markets hide many mysteries. One of them is the recent slide in the long-term bond yields. As the chart below shows, both the nominal interest rates and the real interest rates have been in a downside trend since March (with a short-lived rebound in June). Indeed, the 10-year Treasury yield reached almost 1.75% at the end of March, and by July it decreased to about 1.25%, while the inflation-adjusted yield dropped from -0.63% to about -1%.
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Thursday, July 08, 2021
US Interest Rates: Making the Improbable Today’s Reality / Interest-Rates / US Bonds
By: Paul_Rejczak
The US Federal Reserve has raised its interest rate guidance for 2023; and potentially late 2022. Oddly enough, interest rates have moved lower since the last Fed meeting.
I see an opportunity today.
You would think that the higher interest rate guidance would have created a bump higher in the $TNX (Ten-Year Note Yield). However, wouldn’t that make too much sense? The more trading experience I have gotten over the last two decades, the clearer it is, that logic doesn’t always work - unless you are early enough.
If you have been following along, you know that yesterday, I discussed the S&P Banking sector, namely KBE, as we wait for a pullback to some key technical levels.
It got me thinking: the Ten-Year Note yield should be very similar to that trade.
Friday, June 18, 2021
FOMC Surprise Takeaways / Interest-Rates / US Federal Reserve Bank
By: Monica_Kingsley
The Fed didn‘t play ostrich on inflation, but didn‘t take action either. While acknowledging that 2021 inflation would come at 3.4%, it hinted at 2 rate hikes before 2023 is over – and didn‘t mention taper at all.
It‘s though by no means guaranteed that 2021 inflation would come in at this or lower level. Far from it, but Fed‘s yesterday posturing might be a self fulfilling prophecy in one aspect, and that is commodity prices fanning the inflation flames – thus far though, $CRB doesn‘t confirm that, which has bullish implications for oil and beyond. Stock bulls too can look forward for extending gains without a meaningful correction. As for the labor market pressures, I look for these not to be going away soon.
Wednesday, June 09, 2021
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? / Interest-Rates / US Federal Reserve Bank
By: MoneyMetals
‘Taper’ talk from the Federal Reserve is back in focus. But for now, it’s all talk and no action.
Last week, former New York Fed President William Dudley said the central bank will begin the process of tapering – winding down its monthly asset purchases – by year end.
While echoing current Fed policymakers’ position that the recent spike in prices is “transitory,” Dudley acknowledged the likelihood of inflation persisting above 2% longer term.