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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, August 04, 2022

Should We Be Prepared For An Aggressive U.S. Fed In The Future? / Interest-Rates / US Interest Rates

By: Chris_Vermeulen

Traders expect the U.S. Fed to soften as Chairman Powell suggested they have reached a neutral rate with the last rate increase. The US stock markets started an upward trend after the last 75bp rate increase – expecting the U.S. Fed to move toward a more data-driven rate adjustment.

My research suggests the U.S. Federal Reserve has a much more difficult battle ahead related to inflation, global market concerns, and underlying global monetary function. Simply put, global central banks have printed too much money over the past 7+ years, and the eventual unwinding of this excess capital may take aggressive controls to tame.

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Interest-Rates

Wednesday, August 03, 2022

The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ / Interest-Rates / US Interest Rates

By: MoneyMetals

With last week’s second 75 basis-point rate hike, the Federal Reserve now claims it has achieved a “neutral” monetary policy stance. That would mean, in theory, that interest rates are neither stimulating nor restraining the economy.

"Now that we're at neutral, as the process goes on, at some point, it will be appropriate to slow down,” Fed Chairman Jerome Powell said.

Powell was effectively telling markets he intends to pivot away from inflation fighting.

Yet inflation, even when measured by the Fed's own preferred gauge, continues to run hot.

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Interest-Rates

Saturday, July 09, 2022

Central Banks QT SCAM - Bank of England Set to DELETE UK Treasury Bonds off it's Balance Sheet / Interest-Rates / Quantitative Easing

By: Nadeem_Walayat

Just as the Bank of England handed most of the interest that the UK treasury pays on the Gilts it holds back to the TREASURY
So what do you think the Bank of England is going to do as maturing bonds are removed from it's balance sheet, I will tell you whats going to happnen, they are going to subvert QT so that most of the money the treasury pays the Bank of England on mautirng bonds is going to find it's way back to Treasury in a technical excercise of deleting maturing bonds off central banks balance sheet.

The only question market is will the clueless mainstream financial press be able to cotton on to the inflationary Weimer Republic money printing scam that the Bank of England and Treasury will be perpertruating or not?

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Interest-Rates

Friday, July 08, 2022

The Fed Is Afraid of Inflation and Tightens Its Hawkish Stance / Interest-Rates / US Interest Rates

By: Arkadiusz_Sieron

The Fed gives no illusions: it will maintain its hawkish stance. Meanwhile, gold plunged decisively below $1,800, which has bearish implications.

Yesterday (July 6, 2022), the FOMC published the minutes from its last meeting, held in mid-June. Although the publication reveals no major surprises about US monetary policy, it shows rising worries within the Fed and also strengthens its hawkish rhetoric.

Why? First, the Committee’s members acknowledged that “the near-term inflation outlook had deteriorated since the time of the May meeting.” They also agreed that risks to inflation were skewed to the upside and that persistently high inflation could de-anchor inflation expectations:

Many participants judged that a significant risk now facing the Committee was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted. On this matter, participants stressed that appropriate firming of monetary policy, together with clear and effective communication, would be essential in restoring price stability.
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Interest-Rates

Sunday, July 03, 2022

Is the US Yield Curve Inversion Broken? / Interest-Rates / US Bonds

By: Nadeem_Walayat

The US has experienced 6 recessions over the past 40 years each of which were accompanied by an inversion of the 2 year and 10 year treasury bond yields an average of 18 months BEFORE the recession so whilst US yield curve inversions have proven to be a useful indicator in the past, though this time around inflation has been warning of a recession for a good 6 months before the US yield curve recently tentatively inverted sending MSM into a spin. Still the below chart does demonstrate that a yield curve inversion was imminent given that the interest rates have hit the down sloping trendline at which point yield curves tend to invert usually in advance of a recession which tends to typically follow 12 to 18 months after inversion, in terms of stocks and housing this implies downwards price pressure AHEAD of the recession rather than WITH the recession. But again all of the inversions of the past 20 years were during periods of LOW inflation.

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Interest-Rates

Monday, June 27, 2022

Have US Bonds Bottomed? / Interest-Rates / US Bonds

By: Nadeem_Walayat

A patron asked if US bonds have bottomed / are cheap to buy now that inflation is 'peaking'.

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Interest-Rates

Sunday, April 24, 2022

Will the Fed Raising interest Rates Cause a Recession? / Interest-Rates / US Interest Rates

By: Richard_Mills

A recession is what results when an economy stops growing. The National Bureau of Economic Research, the group entrusted to call the beginning and end dates of a recession, defines it as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

Economists define a recession as two consecutive quarters of decline in GDP, which is the total value of all goods and services a country produces.

We aren’t there yet, but the war between Russia and Ukraine has prompted a re-evaluation of the growth prospects for the world economy and some of the major players in it. According to CBC News, the International Monetary Fund is blaming the war for disrupting global commerce, pushing up oil prices, threatening food supplies and increasing uncertainty already heightened by the coronavirus.

The 190-country lender therefore slashed its global growth forecast to 3.6% this year and next.

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Interest-Rates

Monday, April 18, 2022

The myth of PH’s bankruptcy and “Chinese debt slavery” / Interest-Rates / Asian Economies

By: Dan_Steinbock

In 2017, Forbes reported that President Duterte will force Philippines into China’s debt slavery and bankrupt the economy by 2022. The fake story was promoted heavily by international and Philippine media. The question is, why?

In May 2017, Forbes released a column that claimed that “New Philippine Debt of $167 Billion Could Balloon To $452 Billion: China Will Benefit.” It was written by Anders Corr, who was portrayed as an “independent” geopolitical risk analyst.

“Over 10 years,” Corr boldly predicted, “that could balloon Philippines’ debt-to-GDP ratio as high as 296%, the highest in the world.” Fueled by expensive loans from China," he said, "Dutertenomics will put the Philippines into virtual debt bondage.”

At the time, I argued that Corr’s prediction was idiotic and up to 240-250 percentage points off. Yet, it was quoted widely both internationally and in the Philippines.  
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Interest-Rates

Saturday, April 16, 2022

Inflation pushes the 30-year Treasury bond yield through long-term moving average trends! / Interest-Rates / US Bonds

By: Gary_Tanashian

Okay, let’s take a breath. I don’t like to use ‘!’ in titles or even in articles. In fact, when I see too many of them I immediately think that someone really REALLY wants me to see their point. That said, the signal shown below is pretty important.

It’s in-month with a monstrously over-bearish bond sentiment backdrop similar to when we installed a red arrow on the chart below at the height of the Q1 2011 frenzy (cue the Bond King: “short the long bond!”). Chart jockeys are probably delivering the bad news of the chart’s inverted H&S, a potential for which NFTRH began managing a year ago when the 30yr yield hit our initial target of 2.5% and then recoiled as expected after the public became very concerned about inflation.

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Interest-Rates

Friday, April 01, 2022

US Interest Rate Yield Curve 101 – Steep, Flat, Inverted – What’s The Difference? / Interest-Rates / Inverted Yield Curve

By: Chris_Vermeulen

The yield curve plots the current yield of a range of government notes and bonds in the “primary market.” The worldwide bond market – including private and government debt — currently represents about $120 trillion in outstanding obligations. The United States accounts for roughly $46 trillion (39%).

The U.S. government finances its spending by collecting taxes and issuing debt. More specifically, the U.S. Treasury funds deficit spending by issuing debt instruments with a range of maturities. 

  • Treasury Bills have maturities from one month to one year.
  • Treasury Notes have maturities from two to ten years.
  • Very long-term debt is issued as Treasury Bonds with 20- and 30-year maturities. 
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Interest-Rates

Friday, March 25, 2022

The Yield Curve flattener and a Coming Transition / Interest-Rates / Inverted Yield Curve

By: Gary_Tanashian

As the Yield Curve flattens, this inflation is different from the 2020 inflation

In 2020 an inflationary yield curve steepener was in the bag as the Fed dropped and pinned the Funds Rate and sucked up every bond it could get its hands on (in order to monetize/print). The bond market made the logical signals about the resulting inflation as the short end was pinned by a combination of Fed policy and the frightened, risk ‘off’ herds clustered in T-Bills and short-term Treasuries, relative to the long end.

Gold and then stocks picked up on it first, followed by commodities, which were tardy but are now the star performer late in the inflation cycle. Hmm…

Side Note: The most buyable looking chart in the lower panels? On this big picture, that would be gold.

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Interest-Rates

Tuesday, February 15, 2022

US Treasury Bonds Not Reflecting Risks Like They Usually Do – Where’s The Beef? / Interest-Rates / US Bonds

By: Chris_Vermeulen

I’ve been paying close attention to Bonds as the global markets react to rising inflation and global central bank moves recently. The US Federal Reserve has yet to take any actions to raise rates, but we all know it will come at some point. Longer-term bonds are acting as if these risks are much more subdued than many traders/investors believe – which has me questioning if global central banks have overplayed the stimulus game?

Why would traditional safe-haven assets fail to act in a manner that reflects current market risks like they would typically do? Why have precious metals failed to reflect these risks also properly? Is there something brewing in traders’ minds that are muting or mitigating these traditional safe-haven assets?

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Interest-Rates

Monday, February 14, 2022

What Fed Jawbones Mean for Business / Interest-Rates / US Interest Rates

By: Gary_Tanashian

And the Fed is listening.

[edit] After this post was published another Hawkish jawbone came in the form of James Bullard and a call for a larger rate hike in March. CME Group Fed Futures traders quickly adjusted their expectations to a .5% March hike at the behest of the Bullard jawbone. The point of my post is intact, and this heavy dose of expectations management may indeed result in .5% in March or it could be a shock absorber for the post’s original thesis, which is that a .25% hike could come sooner. The point I made at the end of the post still holds: “If the Fed is caught this far off guard, anything is possible”.

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Interest-Rates

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.

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Interest-Rates

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.

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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.”

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Interest-Rates

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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Interest-Rates

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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Interest-Rates

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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Interest-Rates

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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