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Tag Archives: corporate bonds

TIC October: More Foreign Bills & More Private Corporates

Since we highlighted the action in T-bills yesterday and the day before, it’s worth at least mentioning what TIC had to say about the instruments. Foreigners had been reducing their holdings of them not out of growing distaste but rather the opposite. There’s not nearly as many of them, not enough for what’s demanded, the Treasury Department quite purposefully (and unhelpfully) supplying fewer of them.As we expected, according to TIC, foreign holdings of bills declined again in October by...

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Tactical Update: Uncertainty Abounds

This seems an opportune time to review the difference between Strategy and Tactics. Strategy and tactics are how we achieve our goals and objectives. In our specific case, the goals and objectives are financial in nature. Strategy is the path we will take to get from where we are today to where we want to be tomorrow; it is the big picture plan. In investing strategy is your asset allocation target, how you will allocate your resources across various asset classes to achieve the returns you...

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Brief Summary Of Where Things Stand Getting Closer to Q4

Flash PMI’s for September 2020 around the world add more evidence to the possibility of a global slowdown during the economy’s all-important rebound quarter. Q2 was the big downturn, and so it always going to be Q3 where the bounce back would be sharpest. While that has definitely been the case, concerns are mounting for what might follow in Q4. As we’ve seen elsewhere, in too many places, July. It showed up in Europe again; yesterday IHS Markit reporting a sharply lower composite PMI for...

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A Good Time For Some Q & A: Bank Reserves, Treasury Auctions, MMT, and the Monetary Resolve

Working with my colleague Joe Calhoun (mostly him), we’ve come up with what we think is a list of questions that quite naturally arise from this week’s discussions of bank reserves, some specific and technical, the monetary system, some theoretical, some practical, and the (much) wider economic consequences which follow from those. 1. When the bank buys a Treasury note/bond/bill at auction, where does the money come from? When the Fed then buys the Treasury from the bank in QE can’t...

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If Dollar Is Fixed By Jay’s Flood, Why So Many TIC-ked At Corporates in July?

When the eurodollar system worked, or at least appeared to, not only did the overflow of real effective (if virtual and confusing) currency “weaken” the US dollar’s exchange value, its enormous excess showed up as more and more foreign holdings of US$ assets. Mostly US Treasuries, especially in official hands, but not entirely those. That much is perfectly clear; you can actually see the difference on every chart despite all the QE’s and trillions in bank reserves following after...

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20/8/20: All Markets are Now Monetized

While the economy burns, the stock markets are literally going bonkers. Here are the main implied volatility options:Which are symmetric, in so far as they treat volatility as symmetrically-valued to the upside and downside. And here is another way of looking at the same concept via repricing speed, or the rate of change in actual P/E ratios of S&P500 over longer time horizons, in this case: 20 weeks running P/E ratios change:Source of the chart is @longvieweconomics. What does the above...

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Buckets and Tookits, Empty Each

It’s incredible, in a way, because right from the start he’s got everything on his side. There are the media write-ups which all say the exact same thing, calling this an exact science being practiced by the wisest, most considerate stewards. The legend we’ve been raised with. Lore and scholarship (I repeat myself). Most of all, everyone. When everyone says it’s a very good thing that Jay Powell’s definitely a reckless money printer, our brains aren’t wired to readily believe everyone could...

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Don’t Low Rates On Junk Bonds Mean Fed-fueled Credit Bubble? No. Precisely The Opposite.

Despite what we’ve all been taught, and what gets reinforced in the media, it’s not really that difficult to get people to see the interest rate fallacy at least where it all starts. Central bankers say that low rates are stimulus when this runs contrary to every bit of historical experience as well as evidence. Yes, they are lying to you.When you begin explaining how by first using government bonds, suddenly it does make a lot of sense. Demand for the safest and most liquid instruments...

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Not COVID-19, Watch For The Second Wave of GFC2

I guess in some ways it’s a race against the clock. What the optimists are really saying is the equivalent of the old eighties neo-Keynesian notion of filling in the troughs. That’s what government spending and monetary “stimulus” intend to accomplish, to limit the downside in a bid to buy time. Time for what? The economy to heal on its own. Fill up the bathtub, so to speak, with artificial stimulus water (aggregate demand) until such time as the basin stops leaking and it’s that much...

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The Big Picture’s Going To Need More Than Magic Words

What connects March 2020 with February 2008 as well as the Crash of ’87 all then with the Great Contraction which initiated the Great Depression? If you said economic and financial chaos, you’d be partly right. There wasn’t really much or any of that in 1987, though there was with the other three. People including politicians and central bankers don’t seem to be aware of the difference. For those who grew up on the old Sesame Street cartoons, one of these things is not like the others. But...

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