Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.
Friday, April 12, 2019
Trump Calls for New Quantitative Easing to Prop Up U.S. Economy / Interest-Rates / Quantitative Easing
By: MoneyMetals
As gold and silver markets continue in choppy trading this spring, bulls are hoping a dovish Fed will sink the dollar and lift the metals.
Now that the Federal Reserve is on “pause” – presumably for the rest of 2019 – perhaps investors can stop obsessing over interest rate decisions by central planners. Perhaps markets can finally trade based on actual market signals and underlying fundamentals.
Perhaps ... not.
With 2020 election campaigns already underway, interest rate policy will be a political football in the months ahead. Incumbent administrations almost always favor lower interest rates heading into their re-election bids, and this one is no exception.
Wednesday, April 10, 2019
Is The Federal Reserve ‘Too Big To Fail’? / Interest-Rates / US Federal Reserve Bank
By: Kelsey_Williams
The term “too big to fail” refers to certain businesses whose viability is considered critical to the survival and effective operation of our economic system. These very large businesses are designated as too big to fail because their failure or bankruptcy would have disastrous consequences on the overall economy.
The potential effects are considered to be severe enough, and the costs so unbelievably large, that these businesses are afforded special attention and consideration in the form of bailouts and protection from creditors.
The expenses necessary in order to save a large institution from bankruptcy are considered less than the costs that would be incurred if the institution were allowed to fail. Active application and implementation of both alternatives were prominently featured in the financial crisis of 2008.
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Wednesday, April 03, 2019
Trump Readies Shake-up of Fed Banking Cartel / Interest-Rates / US Federal Reserve Bank
By: MoneyMetals
Establishment journalists, establishment economists, and establishment politicians are freaking out. It seems they can’t cope with the prospect of an outspoken monetary reformer potentially becoming the next member of the Federal Reserve Board of Governors.
President Donald Trump announced recently he would nominate longtime free-market advocate and close political ally Stephen Moore to a currently vacant seat at the Fed.
“Trump’s choice of former campaign adviser Stephen Moore to serve on the Federal Reserve Board is stirring misgivings among some bankers,” reports Politico.
“Economists are furious,” according to QZ. “The news has been met with a heady combination of derision, bafflement, and general hullaballoo, with Moore variously described as ‘a loyalist, not an expert’.”
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Tuesday, April 02, 2019
Why Is the Fed Paying So Much Interest to Banks? / Interest-Rates / US Federal Reserve Bank
By: Ellen_Brown
“If you invest your tuppence wisely in the bank, safe and sound, Soon that tuppence safely invested in the bank will compound, And you’ll achieve that sense of conquest as your affluence expands In the hands of the directors who invest as propriety demands.” — “Mary Poppins,” 1964
When “Mary Poppins” was made into a movie in 1964, Mr. Banks’ advice to his son was sound. The banks were then paying more than 5% interest on deposits, enough to double young Michael’s investment every 14 years.
Now, however, the average savings account pays only 0.10% annually—that’s one-tenth of 1%—and many of the country’s biggest banks pay less than that. If you were to put $5,000 in a regular Bank of America savings account (paying 0.01%) today, in a year you would have collected only 50 cents in interest.
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Tuesday, April 02, 2019
Inverted Yield Curve Fears Are Early / Interest-Rates / Inverted Yield Curve
By: John_Mauldin
Last week, the yield curve inverted for the first time since 2007. The yield for 10-year Treasuries fell below the yield for the 3-month T-Bill.
The inversion set off alarm bells and US stocks fell sharply. While concerns are reasoned, the alarm bells may be premature.
Inversion is an historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, although it’s likely.
Sunday, March 31, 2019
Warning: Central Banks CANNOT Normalize Policy… Ever / Interest-Rates / Negative Interest Rates
By: Graham_Summers
As I have been warning for years, Central Banks CANNOT normalize the Everything Bubble they created between 2008 and 2016.
Yesterday, yet another major Central Bank confirmed that I was correct. In this particular case, it was the European Central Bank (ECB).
The ECB first cut interest rates to NEGATIVE in 2014. It then lowered them an additional three times to -0.4% in 2016.
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Wednesday, March 27, 2019
Yield Curve Has Inverted. Will Gold Rally Now? / Interest-Rates / Inverted Yield Curve
By: Arkadiusz_Sieron
The yield curve followed suit of the Fed and also inverted. Inverted yield curve is a sign of an incoming recession, they say. However, what is the background of this yield inversion and how will gold react to its emerging story?
Red alert! Or, actually, a yield alert! After months of worries, the yield curve has finally inverted. Well, maybe not the whole yield curve, but one of its segment. As one can see in the chart below, the spread between US 10-year Treasury and 3-Month Treasury dived on Friday to its lowest since 2007.
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Wednesday, March 27, 2019
Has The Fed Finally Lost Control Of US Interest Rates? / Interest-Rates / US Interest Rates
By: Avi_Gilburt
Back in the 1940’s, Ralph Nelson Elliott once noted:
At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend.
So, rather than be startled by the news of the past week, I have been trying to warn anyone who was willing to listen that if you want to know what the Fed is going to do, simply read the bond charts. You see, the Fed does not lead the market. Rather, the Fed follows the market. And, the market told me back in late 2018 that the Fed is about to fall behind the market.
Yet, almost every single person who reads this article will think I am crazy for saying something so ridiculous. Right? But, that is why I was prepared for the action seen in the bond market this past week, and not shocked as most participants seemed to be. In fact, one of my subscribers laughingly posted an article in our chatroom entitled "Riding the Bond Rally No One Saw Coming," while noting how our members were certainly quite prepared for this rally in the bond market.
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Tuesday, March 26, 2019
US Treasury Bond Yield Inversion and Political Fed Cycles / Interest-Rates / Inverted Yield Curve
By: Chris_Vermeulen
With so much news hitting the wires regarding the Treasury Inversion level and the “potential pending recession”, we wanted to shed a little insight into this phenomenon and what we believe the most likely outcome to be going forward. Our researchers, at Technical Traders Ltd., believe the Treasure inversion is a reactionary process to overly tight US Fed monetary policies, consumer demand factors and outside cycle forces. There is very little correlation to inverted Treasury levels and causation factors other than the US Fed and global central banks. We believe consumers and consumer sentiment also play a role in setting up the conditions that prompt yield inversion. The one aspect we believe everyone fails to consider is the uncertainty that is associated with major US election cycles.
The US Fed is obviously a driving force with regards to yields and consumer expectations. In the past, the US Fed has rotated FFR levels up and down by enormous amounts (in some cases 200 to 500%+ over very short spans of time. Consumers, you know those people, the ones that are the actual driving force of the local and state level economies, have been the the ones having to deal with wildly rotating FFR levels and the consequences of their debt rotating from 4~7% average interest rates to 8~25%+ average interest rates over the span of just a few years.
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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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