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Tag Archives: federal reserve

While The Fed Chases The Unemployment Rate, TIC’s Eurodollar Deflation Case Is Unusually Unambiguous

The Chinese yuan had traded in a curiously narrow range ever since mid-June. Stuck, it seemed, between 6.50 at the bottom and around 6.45 ceiling, the lack of movement in either direction raised suspicions of concerted official effort. China’s officials, obviously, certainly not those from the Federal Reserve who spend all their time scouring drug reports and benefits cliffs so as to try to legitimize the unemployment rate rather than pay any mind whatsoever to dollars and global money.On...

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Retracing The Yield Gap For The Unemployment Rate Isn’t The Same Thing

Thomas Barkin is President and CEO of the Federal Reserve’s Fifth District branch headquartered in Richmond. Beginning the job during the tumultuous and confusing 2018 (for those wherever at the Fed), Barkin in 2021 is and has been a voting FOMC member. Whether he is judged a “hawk”, “dove”, or some other kind of feathering maniac I’d leave to the mainstream’s infatuation with Greenspan and Volcker legends. It isn’t actually important.On the contrary, the flattening yield curve particularly...

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The Jump in Rates Does Little for Sterling, the Canadian Dollar, and the New Zealand Dollar

Overview:  Weak growth impulses from China and a continued rise in energy prices greets the new week.  Equities are struggling.  Hong Kong, Japan, South Korea, and Taiwan fell in Asia Pacific activity.  Europe's Dow Jones Stoxx 600 is about 0.5% lower near midday, while US futures indices are also nursing small losses.  Crude is trading at new highs that puts November WTI above $83 and Brent above $85 a barrel.  Benchmark 10-year yields are mostly 4-6 bp higher.  A larger than expected jump...

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A Short Note on the Pricing of the Fed Funds Futures: Aggressive

In assessing the trajectory of Fed policy the market is discounting, we prefer using the Fed funds futures contracts over the Eurodollar futures.  The Fed funds settle at the average effective rate, while the Eurodollar futures contracts are three-month deposit rates.  The Fed funds futures seem to be implying aggressive tightening by the Federal Reserve, which as of less than a month ago, half of whom did not expect a rate hike would be appropriate next year.  The math of the Fed funds...

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The Consequences of What You Don’t See

Because it’s what you don’t see that ultimately matters, the public is left entirely in the dark unable to join what really should be easy dots to connect. Something is wrong, and pretty much everyone acknowledges this if in their own way. We can see the social and political disintegration before our very eyes, the anger, the “revolution”, even the increasing fragmentation as a world once buoyed by globalization turns diametrically against it. We are constantly told to expect growth and...

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Chip Shortages, Crude Boiling, Fed Explosion And…No Inflation

An integrated circuit (IC) is a set of electronic circuits put together on one small, flat semiconductor medium. We call this thing a chip, and it is essential for so much of what we do in the modern computerized, digital world. Manufacturers can’t even produce cars without them.It stands to reason, then, that any shortfall or hitch in the availability of IC’s could be a huge economic problem with systemic implications. Thus, when some trade magazine which is closely following the physical...

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US Jobs Highlight the Week Ahead

In the week ahead, the US September employment report is the high-frequency data highlight.  It is the last non-farm payroll report before the November 2-3 FOMC meeting, which, barring a significant downside surprise, will decide to begin the gradual reduction of the Federal Reserve's bond purchases.  Although Fed Chair Powell has tried to distance policy from any single labor market metric in the past, he clearly identified the next non-farm payroll report as a key to the tapering decision...

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Soaring Energy Prices Lift Yields, Weigh on Equities and the Greenback Pops

Overview: Rising energy prices and yields are helping lift the US dollar and weighing on equities.  November WTI has pushed above $76, while Brent traded above $80, and natural gas is up for the fourth consecutive session, during which time it has risen by about 25%.   The US 10-year yield has surged to almost 1.53%, up more than 20 bp since the middle of last week. Near 32 bp, the US 2-year yield is at a new 18-month high. European yields are 3-5 bp higher, with UK, Sweden, and Swiss...

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Maybe More Autumn Than Strictly August

Barely more than two weeks. That’s all was needed for the headlines to scream “bloodbath”, “end of the bull market”, and the always popular BOND ROUT!!! The 10-year Treasury yield had bottomed out in August and by mid-September 2019 this key benchmark rate screamed upward by 43 bps in just seven sessions. Yes, seven. To think, the financial media has made the last few trading days in the bond market seem like some uniquely gigantic earthquake never before witnessed in all of modern...

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Some Next Steps To Watch For Scarce Collateral

It gets even more interesting in the bill market, not that anything here has been unexpected. And since this is the same week as Evergrande, still no hint of spillover and tightening, at least not beyond what has become typical.That means mostly on the supply side. Treasury Secretary Yellen is losing breathing room fast, meaning she’s forced to dig further into what’s on weekly offer. For instance, the last 4-week auction – conducted yesterday – only sold $10 billion when compared to $40...

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