Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Wednesday, August 07, 2019
Are You Still Trying To “Fade” The Bond Market Rally? / Interest-Rates / US Bonds
By: Avi_Gilburt
For weeks, if not months, I have been reading one bearish bond article after another. In fact, many of these same writers have been arguing with me for months about the bond rally I expected back in November of 2018. One suggests that this rally is really a “fake,” whereas another has been strongly suggesting that investors fade this rally, with many more supporting their opinions. The problem is that these analysts have been trying to “fade” this rally for the last 10-15% up. Yet, I will gladly bank my “fake” 20% profits on this trade.
As each week goes by, I continue to chuckle about how many people do not understand the context of the markets upon which they opine. Remember how certain analysts and investors were that rates were only headed higher back in November of 2018?
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Friday, August 02, 2019
Post FED US Bond Market Yield Spread Falls Further: Risk Aversion is at the Door / Interest-Rates / US Bonds
By: QUANTO
All Powell needed to do was cut rates and to soften the blow on the short end of the curve, he needed to speak of the strong economy and that would have controlled the 1 month and 3 month and 2 year yields. Instead he ended up confusing about recovery and talking of nonsensicall comical terms like insurance cut etc. These are jargons that one should never use.
The reaction from the bond market was immediate as the 1 month and 3 month yield jumped sharply. Money was flowing out to the long end which is exactly what Powell didnt want to happen when he said "inflation gets baked in to bond yields". Even as he was saying, that is what was happening. We take a look at some of the charts which define and go beyond normal technical and trend lines for forex. We have always suggested: NEVER TRADE FOREX ON TECHNICAL INDICATORS. THEY ARE LAGGING. TO LOOK BACK AND TRADE FORWARD IS FOOLISHNESS.
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Thursday, August 01, 2019
US Yield Curve Inverted Months Earlier than Most Think / Interest-Rates / Inverted Yield Curve
By: John_Mauldin
The inverted yield curve is one of the more reliable recession indicators.
I discussed it at length last December. At that point, we had not yet seen a full inversion. Now we have, and it appears the curve was “inverted” back then, and we just didn’t know it.
The Powell Fed spent 2018 gradually raising rates and reducing the balance sheet assets it had accumulated in the QE years.
This amounted to an additional tightening. In fact, the balance sheet reduction may have had more impactthan lower rates.
Now if you assume, as Morgan Stanley does, every $200B balance sheet reduction is equivalent to another 0.25% rate increase, which I think is reasonable, then the curve effectively inverted months earlier than most now think.
Tuesday, July 30, 2019
US Fed Infinite QE Forever at Zero Bound / Interest-Rates / Quantitative Easing
By: Jim_Willie_CB
The widespread profound and recognized global recession, complete with numerous icon corporate failures, will lead the US Federal Reserve to return to unlimited Quantitative Easing with a Zero Percent chaser. The Jackass calls it a return to Infinite QE Forever at the Zero Bound. Not only is the double step of return to QE with a sequence of interest rate cuts urgently necessary, but the financial markets are demanding it. In fact, they are holding the USFed hostage, as the venerable august body is backed into a policy corner. This time seems different. For ten years, the USFed has relied upon coordinated policy with the Euro Central Bank, having used all the most extreme measures, yet has a systemic failure on its hands. Witness extreme monetary policy failure. The systemic failure is both financial and economic. The bond purchase program wrecked the bond market by driving away legitimate investors, while the ultra-low interest rates wrecked the economy by distorting asset allocation.
Tuesday, July 23, 2019
We Are in for Decades of Ultra-Loose Monetary Policy / Interest-Rates / Quantitative Easing
By: Jared_Dillian
President Trump recently nominated Judy Shelton to the Federal Reserve Board of Governors. She is the United States director for the European Bank for Reconstruction and Development, which I had never heard of until her nomination.
Shelton is a Republican and believes in the adoption of a gold standard. She currently believes in lowering interest rates, after spending the Obama years criticizing the Fed for lowering interest rates.
You may wonder how a person can be in favor of a gold standard and also for lowering interest rates at the same time.
I am wondering that, too.
Monday, July 22, 2019
What the World Doesn’t Need Now is Lower Interest Rates / Interest-Rates / Global Financial System
By: Michael_Pento
The Q2 earnings season is upon us and the risks to the rally that started after the worst December on record at the close of last year is in serious jeopardy. We received a glimpse of this with some of the current companies that have reported. For example, to understand how dangerous this earnings reporting season can be, take a look at what one of the largest US multinational firms had to say recently after it reported earnings. The Minnesota-based Fastenal, which is the largest fastener distributor in North America, reported worse-than-expected second-quarter earnings and revenue. Shares of Fastenal promptly tanked more than 4%. But what the management said about the quarter was very interesting. The company said in its press release that its strategy to raise prices to offset tariffs placed to date on products sourced from China were not sufficient to also counter general inflation in the marketplace. Read full article... Read full article...
Wednesday, July 17, 2019
Federal Debt Ceiling Reached as Federal Spending Rages / Interest-Rates / US Debt
By: MoneyMetals
The federal government will soon run up against its self-imposed borrowing cap once again.
Current estimates are for the government to max out its credit limit at a little over $22 trillion in early September. Congress goes on recess in August, so there is some pressure to address the cap right now.
Treasury Secretary Steve Mnuchin has been fulfilling what seems to be the most sacred responsibility of his position: borrowing money. It’s one that each of his predecessors has also undertaken, without fail and without regard to party affiliation, in recent decades.
Wednesday, July 17, 2019
Boost your Trading Results - FREE eBook / Interest-Rates / Learn to Trade
By: Submissions
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Friday, July 12, 2019
The Hidden Reason Why Fed and "Systemically Important" Banks Oppose a Gold Standard / Interest-Rates / US Federal Reserve Bank
By: MoneyMetals
Chairman Powell’s testimony this week was closely scrutinized not just for its economic implications but also for its political overtones. Powell cited “trade tensions” as cause for concern about the strength of the global economy. He clearly seemed to be blaming President Trump’s tariffs.
But if the tariffs are what ultimately move the Fed to cut rates, Trump will have finally gotten what he wants out of Powell. In recent weeks, Trump has stepped up his attacks on the central bank, calling it the biggest problem facing the economy, floating the idea of firing Powell, and suggesting his administration would match China’s and Europe’s "currency manipulation game."
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Wednesday, July 10, 2019
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis / Interest-Rates / Student Finances
By: MoneyMetals
Presidential candidates Bernie Sanders and Elizabeth Warren are promising as much as $1.6 trillion in student debt forgiveness for millions of borrowers. Critics smell a cynical campaign ploy to try to buy the youth vote.
How is it either realistic or fair to declare an entire category of debt to be assumed by taxpayers?
Regardless, pie-in-the-sky proposals to cancel student debt shed light on a very down-to-earth problem for not only college students and recent graduates – but also for the economy and financial markets.
Student loans now rank as the second largest category of American consumer debt – bigger than credit cards, bigger than auto loans, and behind only mortgages.
Friday, July 05, 2019
The Fed May Give Trump His Interest Rate Cut, but It Won’t Help / Interest-Rates / US Interest Rates
By: Patrick_Watson
Investors are in a buying mood despite many economic warning signs. Why?For some, it’s because they expect the Federal Reserve to cut interest rates and otherwise “stimulate” the economy. They believe (correctly) it would drive stock and real estate prices higher.
At the risk of stating the obvious… higher asset prices mainly benefit those who own the assets. Which, in the stock market’s case, is not most Americans.
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Wednesday, June 26, 2019
Elliott Wave: Market Signaling Fed to Cut Interest Rates Soon / Interest-Rates / US Interest Rates
By: EWI
We have tracked the U.S. Federal Reserve's interest rates decisions for years. This week, the Fed once again decided to keep the funds rate unchanged. We expect the Fed to change course soon.
We have tracked the U.S. Federal Reserve's interest rates decisions for years.
In December, we wrote an article titled "Interest Rates Win Again as Fed Follows the Market," where we observed that although most pundits believe that central banks set interest rates, central banks actually follow the freely traded bond market in their rates decisions.
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Tuesday, June 25, 2019
Testing the Fed’s Narrative with the Fed’s Data: QT Edition / Interest-Rates / US Federal Reserve Bank
By: F_F_Wiley
“The fact that financial markets responded in very similar ways … lends credence to the view that these actions had the expected effects on markets and are thereby providing significant support to job creation and the economy.” —Ben Bernanke defends the idea that markets and the economy respond significantly to quantitative easing
“… it will be like watching paint dry, that this will just be something that runs quietly in the background.” —Janet Yellen refutes the idea that markets and the economy respond significantly to quantitative tightening
It doesn’t take much calculation to see that the Fed’s position on quantitative tightening (QT) is blatantly inconsistent with its position on quantitative easing (QE). You only need to notice that the excerpts above, taken together, violate the following pair of postulates:
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Tuesday, June 25, 2019
Why Bond Investors MUST Be Paying Attention to Puerto Rico / Interest-Rates / International Bond Market
By: Rodney_Johnson
They lie, cheat, and steal? No way!In 2014, Puerto Rico issued $3.5 billion in bonds backed by the full faith and credit of the Commonwealth. Now the island’s fiscal managers, a group known as the PROMESA board, an entity that Congress created, claims those bonds are worthless.
While investors put down their hard-earned cash to buy the bonds, the board members have claimed in court that, because the debt issuance put the island over its legal debt limit, the debt should be canceled.
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Thursday, June 20, 2019
Interest Rates Square Minus Zero / Interest-Rates / Central Banks
By: Raul_I_Meijer
I intentionally start writing this mere minutes away from Fed chair Jay Powell’s latest comments. Intentionally, because the importance ascribed to those comments only means we have gotten so far removed from what capitalism and free markets are supposed to be about, that it’s pathetic. The comments mean something for rich socialists, but nothing for the man in the street. Or, rather, they mean that the man in the street will get screwed worse for longer.
And it’s not just the Fed, all central banks have it and do it. They play around with rates and definitions and semantics until the cows can never come home again. And they have such levels of control over their respective societies and economies that the mere use of the word “markets” should result in loud and unending ridicule. There are no markets, because there is no price discovery, the Fed and ECB and BOJ got it all covered. Any downside risks, that is.
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Wednesday, June 19, 2019
Most Income Investors Are Picking Up Nickels in Front of a Steamroller / Interest-Rates / Corporate Bonds
By: Jared_Dillian
Income investing is hard.
Let’s say you buy 20 bonds. Each of them yields 5%. Nineteen out of 20 mature at par and you get your money back, with interest.
One of them defaults. You are back where you started!
It is said that income investing is a negative art. Your goal isn’t to pick the winners—it’s to avoid the losers. You want to pick winners, invest in stocks. Have you seen a chart of Beyond Meat? Bonds generally don’t do that.
It is also said that income investing is like picking up nickels in front of a steamroller. You’re earning a 4–5% coupon, and you could get whacked pretty much any day, just like what happened at Toys “R” Us. It is a bit like selling puts.
Monday, June 17, 2019
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion / Interest-Rates / Inverted Yield Curve
By: Robert_Ross
The markets are in the middle of a once-in-a-decade event.
And it says a lot about what you should do with your money right now.
I’m talking about a critical recession indicator called the yield curve inversion—or the Diamond Cross.
As you may recall, a Diamond Cross happens when the difference between the yield on the 10-year Treasury note and the 3-month Treasury bill is negative. This is a telltale sign that the economy is slowing.
The Diamond Cross popped up briefly in March, only to return on May 15. Last week, it was the steepest, or most severe it’s been since April 2007.
Tuesday, June 11, 2019
Fed Running Out of Time and Conventional Weapons / Interest-Rates / US Interest Rates
By: Michael_Pento
The buy and hold mantra from Wall Street Carnival Barkers should have died decades ago. After all, just buying stocks has gotten you absolutely crushed in China for more than a decade. And in Japan, you have been buried under an avalanche of losses for the last three decades. And even in the good old USA, you wouldn’t want to just own stocks if the economy was about to enter another deflationary recession/depression like 2008. Likewise, you wouldn’t want to own any bonds at all in a high-inflation environment as we had during the ’70s.
The truth is that the mainstream financial media is, for the most part, clueless and our Fed is blatantly feckless.
The Fed has gone from claiming in late 2018 that it would hike rates another four times, to now saying that it is open to actually start cutting rates very soon.
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Sunday, June 09, 2019
The Fed Stops Pretending / Interest-Rates / US Interest Rates
By: Peter_Schiff
Well, it didn't take much and it didn't take long. After years of delays, a tentative start, many cautious pauses along the way, and a top speed that never really hit cruising velocity, the Fed has taken the first available off-ramp on the road towards policy "normalization." In a speech on Tuesday this week in Chicago, Fed Chairman Jerome Powell delighted Wall Street by signaling that the Fed may soon deliver the gift that investors had been hoping for...the first interest rate cut in almost a decade.
While many savvy economists should have seen this coming, as late as October of last year, almost no one in the financial world thought that the Fed would so easily abandon its long-held bias without a gale force recession blowing them off course. But, in reality, all it took was a light breeze to force a 180-degree turnaround.
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Wednesday, June 05, 2019
Bond Market Shows Us The Power Of The Dark Side / Interest-Rates / US Bonds
By: Avi_Gilburt
First, I want to begin this article by thanking all those who read my articles for the amazing outpouring of support and prayers for my wife who is recovering from a freak accident. So, with her sleeping right now, I thought I would pen another article to at least keep myself somewhat busy.
Over the years, I have published many price trend change expectations which have hit quite well. Some examples include the top to gold in 2011 at 1915 (with gold topping at 1921), the bottom in the dollar in 2011 (with an expectation of a multi-year rally to within pennies of our target struck six years later), many major turning points in the S&P500, and many other calls throughout the last 8 years I have been publishing my market calls.
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