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Tag Archives: federal reserve

The Dollar Remains Under Pressure even as Bond Yields Rise

Overview:  After several attempts, the euro has pushed above $1.22, and the Australian dollar has surpassed $0.8000 as the greenback remains under broad pressure against the major currencies.  Only the yen is having difficulty gaining on the beleaguered US dollar.  Rising yields in the US and Europe have sapped many of the emerging market currencies. Today, the freely accessible currencies like the South African rand, the Mexican peso, and the Turkish lira are among the weakest.   Central...

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Is the Post-COVID Boom Going to Bust?

Yves here. As long-standing readers know, we’ve never exhibited much interest in economic forecasts since even macroeconomists admit they are horrifically unreliable once you get beyond 6 months. Forecasts seemed particularly uninteresting in the post crisis era when a lot of people were trying to paint happy faces on what was eventually declared to be secular stagnation. The much more interesting stories were things like how if evah would the Fed back out of ZIRP, the continuing rise of...

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The Week Ahead: Inflation and the Fed

The reflation and inflation meme tightened their grip on the markets.  Interest rates have risen, and curves have steepened.  Two events occurred around the same time in early November that sent a similar signal: the US election with prospects for significantly more stimulus and a vaccine's availability.  Since the US election and the announcement of a vaccine in early November, the 10-year US break-even has risen from about 165 bp to over 225 bp, before finished the week near 2.15%....

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While Two ‘Fs’ In Cliff, There Isn’t In the SLR Heading Toward One

A few have asked, so I’ve written up what is actually a shorter piece on this SLR business is all about. First, SLR stands for Supplementary Leverage Ratio (and it’s not SLF, as I managed to leave two of the same typos in the main article referenced below, to the point the mistake made it into the headline). Parts of the SLR were set aside last year as a COVID crisis tool, but are scheduled to come back at the end of March 2021. Worth clarifying: it's SLR, *not* SLF. My mistake failing...

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Follow-Through Dollar Buying after Yesterday’s Reversal Tests the Bears

Overview:  After reversing higher yesterday, the US dollar sees follow-through gains today, leaving the euro around a cent lower from yesterday's highs. Sterling's surge is also being tempered. Most emerging market currencies are lower as well.  The jump in bond yields has stalled, but only after Australia and New Zealand yields surged eight basis points to play catch-up with the dramatic rise in the US yesterday that saw the 10-year benchmark trade near 1.31%.  The yield has come back a...

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Monetary Policy and Racial Inequality

Yves here. While this analysis targets a very important question, the impact of cheap money on racial inequality, its analysis on the balance sheet side looks more robust than on the income side. The post looks at how monetary stimulus disproportionately reduces black employment gains, and then multiples the jobs increase by the average income for black households. It seems highly probable that that approach overstates income gains since the financial crisis. First, the jobs created have been...

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Negative Interest Rates Are Coming, but There Is No Chance That They Will Work

Yves here. We’ve sometimes addressed why negative interest rates are a bad idea. A corroborating data point: Sweden ditched its negative interest rate experiment in 2019, and said in mumbled economese that it didn’t do what it was supposed to do. One of the many times we debunked the official rationale for negative interest rates was in a 2016 post, Economists Mystified that Negative Interest Rates Aren’t Leading Consumers to Run Out and Spend. We’ll hoist at length: It been remarkable to...

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Elizabeth Warren’s Not-Ready-for-Prime-Time Robinhood/GameStop Intervention

We initially despaired when Ted Cruz and AOC got into a dustup holding hearing about the short squeeze controversy focused on trading app Robinhood and GameStop. Elizabeth Warren has now weighted via a letter to the SEC (embedded at the end of this post) and a follow-up round of media appearances. The wee problem is her intervention comes off as if she’s trying to get in front of a mob and call it a parade. While Warren’s missive does ask some good questions, it’s not remotely as tight or...

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The Restoration

The focus in the week ahead is squarely on the United States.  The ECB, the BOJ, the Bank of Canada, and Norway's Norges Bank met last week.  No fresh initiatives were taken, but if there is a takeaway, it is that the vaccine appears to have made policymakers, like many of us, more confident about the medium-term outlook, even though more pain and grief are likely first.  Investors see continued open-spigot monetary policy and more fiscal stimulus (e.g., US, EU Recovery Fund).  Coupled with...

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Markets Catch Collective Breath

Overview:  The capital markets were stabilizing today after dramatic moves yesterday. Equity markets are recovering, and the dollar is paring yesterday's gains.  Most equity markets in the Asia Pacific region rose, though Taiwan, South Korea, and Australia were notable exceptions.  Europe's Dow Jones Stoxx 600 is posting a small gain, which, if retained, would be the fifth gain in seven sessions.  US shares are higher after snapping a four-day advance yesterday.  Benchmark 10-year yields are...

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