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Tag Archives: rate hikes

The FOMC Should Probably Cry For Argentina

Argentina was perhaps the biggest success story of “reflation.” Left for dead in global markets as the hammer of the “rising dollar” pounded down on everyone, the country elected new leadership and began taking the right steps toward modern economic integration. That’s the story, anyway. What really happened was a bit different. The country that had been funding itself at the mercy of global eurodollar banks switched to funding itself at the mercy of global eurobonds. Good choice in 2016....

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No Hawks Nor Doves, Just Dollar

On January 24, Treasury Secretary Steve Mnuchin either misspoke or let slip a Freudian sort of wish. Extolling a weak rather than strong dollar, it was seemingly a total break from longstanding official US policy. It’s not really a policy anyone takes too seriously, if for no other reason than the dollar isn’t really a part of the Treasury. Still, the comments moved markets and led to all the usual hysteria, including of the recent inflation variety. Behind the Treasury Secretary’s comments...

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(Chicken) Hawkish

You have to go back four years for some honesty. The FOMC in January 2014 could be more forthright simply because the committee’s members believed they wouldn’t ever have to explain themselves. They voted to taper QE at the end of 2013 with the expectation that the economy would perform as their econometric models laid out. Thus, they could say: The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring...

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You Know What They Say About Appearances

It used to be a big deal, the kind of move that would itself move markets all over the world. Very quietly, JPY has been trading higher over recent weeks and has reached a level of appreciation we haven’t seen since those rocky days in early September. Only then, a rising yen (falling dollar) was a sign of bad things, an anti-reflation direction tied in with falling UST yields and greater bids on eurodollar futures. It was something of a daily trading rule coming out of Asian sessions; if JPY...

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What About 2.62%?

There’s nothing especially special about 2.62%. It’s a level pretty much like any other, given significance by only one phrase: the highest since 2014. It sounds impressive, which is the point. But that only lasts until you remember the same thing was said not all that long ago. Back last March, the 10-year yield had then, like now, broke above 2.60%. In doing so, it surpassed the previous recent high set in December 2016. So, on March 13, 2017, the media was filled with stories about the...

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Inside and Outside, Market and Models Actually Agree On A Final Failing Grade For Yellen

It was another pretty embarrassing day for the Federal Reserve and its policymaking body the FOMC. The latter voted, as expected, to raise the federal funds corridor (or double floor, if you can’t get over IOER fail) by another 25 bps. The long end of the Treasury bond market, however, was bid pushing yields down not up. There is a reason the 10-year UST is considered the main benchmark, meaning that these are not really “rate hikes” but RHINO’s (rate hikes in name only). It was a perfect...

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Chinese Are Not Tightening, Though They Would Be Thrilled If You Thought That

The PBOC has two seemingly competing objectives that in reality are one and the same. Overnight, China’s central bank raised two of its money rates. The rate it charges mostly the biggest banks for access to the Medium-term Lending Facility (MLF) was increased by 5 bps to 3.25%. In addition, its reverse repo interest settings were also moved up by 5 bps each at the various tenors (to 2.50% for the 7-day, 2.80% for the 28-day). These are being characterized as always as rate hikes when in fact...

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I Repeat

The nominal CMT yield on the benchmark 10-year US Treasury note hit its low on July 8 last year. It’s debatable, of course, as to what turned it around; I think “reflation” from there began in Japan and all those whispers of the “helicopter.” It didn’t really matter that the BoJ didn’t really consider the proposition, what did instead was the hope that all central banks finally realized their futility and would turn to something else – anything else up to and including the sensational. In...

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‘Something’ Is Still Out There

In January 2016, just as the wave of “global turmoil” was cresting on domestic as well as foreign shores, retired Federal Reserve Chairman Ben Bernanke was giving a series of lectures for the IMF. His topic wasn’t really the so-called taper tantrum of 2013 but it really was. Even ideologically blinded economists like Bernanke could see how one might have followed the other; the roots of 2016 in 2013. In May and June of that year, in my capacity as Fed chair, I publicly raised the possibility...

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Once Again, Not Korea but March

It’s hard not to put all emphasis on missile tests and other serious forms of sabre rattling. Even doing so, as the bond market may be doing right now, however, misses the underlying. Everything at the moment traces back to mid-March, which in hindsight was a very eventful month in full far away from the Korean peninsula. Take, for example, eurodollar futures.  The curve has in the very important 2018-2020 window utterly collapsed since then.  What that means in terms of market...

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