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Tag Archives: Reflation

No Reflation Here: PBOC Balance Sheet Update May (Same As April)

For the month of May 2021, China’s central bank reported almost exactly the same as it had in April (or March). In the case of foreign assets, as has become standard, nearly identical. Despite reflation dollar flows being described and talked about, they still haven’t reached the official PBOC balance sheet which after so many months of this simply reduces the charade to a mockery.Something is going on in the shadows, and one thing it can’t be is the usual reflationary dollar inflows. If...

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Curve Shape Shifting, In The Wake of Dots

Consumer prices in Japan fell again in May, according to that country’s Ministry of Finance. The headline CPI was 0.1% less last month than it had been in the same month during 2020. Though it was the eighth straight for outright deflation, there was some good news in the core rate, if you could call it that, which flipped to the plus side – by the smallest amount, 0.1% – for the first time since last July. These miniscule inflation figures aren’t just typical for Japan, they are just...

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The FOMC Accidentally Exposes Itself (Reverse Repo-style)

Initially, the dots got all the attention. Though these things are beyond hopeless, the media needs them to write up its account of a more fruitful monetary policy outcome because markets continue to discount that entirely. Dots look like inflationary success if possibly even now more likely, whereas yields and especially bills have (re)taken a more skeptical approach pricing almost no chance for it.Buried in the FOMC minutiae on Wednesday was an upward adjustment first to IOER and then the...

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A Glut of February’s

Ben Bernanke saw it even before he took over from Alan Greenspan. Like his “maestro”, however, Bernanke didn’t really know what to make of it. So, while early in 2005 Greenspan told of his version as an interest rate “conundrum”, his successor a month later tried to add more dimensions and details to the same puzzle via recognizing its clear, and clearly related, monetary flows.Both officials became aware – because it became overwhelming – that funds were flooding into the US especially...

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Why *Only* That Specific One?

On February 23, the US Treasury sold off $60 billion and change of 2-year notes (CUSIP 91282CBN0). This particular shorter-term instrument has been in the crosshairs of the reflation trade, lurching in and out of it going back to last October, perhaps even late September. Caught up being the immediate tenor following the bills which have been bid (for “some” reason) and longer-term notes and bonds which are more reflation sensitive, the yield on the 2s has been yo-yoing back and forth...

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Fragility (脆弱性)

For a short while, with reflation being traded in almost every corner of the global bond market, the Bank of Japan started to get “those” questions again. Almost of the humble brag variety. A few years ago, Japan’s central bank had widened what it considered to be an acceptable trading range for its 2016 QQE addendum of Yield Curve Control (YCC). In 2018, Haruhiko Kuroda’s regime stated that it would “allow” 10-year JGB yields anywhere between -20 bps and +20 bps. By late February 2021,...

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Scorching, Blistering, Highest In A Decade! Powell’s The Voice of Reason Here?

If there is one thing Economists understand very well, it’s mathematics. This is practically all they do, and all that means much to their discipline. If there’s one thing Economists don’t seem either competent with or interested in, it’s the economy. The math is supposed to match the other’s reality, yet rarely does.There are times, however, when simple calculation is sufficient and (figuratively) on the money (literally, that is the whole other story).Such was the case around 2011 and...

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Rechecking On Bill And His Newfound Followers

The benchmark 10-year US Treasury has obtained some bids. Not long ago the certain harbinger of bond rout doom, the long end maybe has joined the rest of the world in its global pause if somewhat later than it had begun elsewhere (including, importantly, its own TIPS real yield backyard). Even nearer-in inflation expectations have rounded off at their current top. Perhaps no more than a short-term rest before each rising again, then again with the rest of the world’s markets acting...

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Soar or Sour: Short Run, *Then* What?

The sound of economic sizzle finally within earshot, though perhaps nearly a year too late. PMI’s for the month of March 2021 were of the sort which should have come about in May and June 2020. The “V”-shaped recovery was much talked about at that earlier time, though in PMI terms (as well as regular “hard” data) the numbers fell way, way short of it. I and others had pointed out repeatedly that to be consistent with an actual recovery, given the depths from where the recession began, the...

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Maybe The Biggest Challenge Is Not To Get Carried Away

Like a child fixated on a shiny new toy, I was enthralled by trading in WTI futures on Monday. There are times when end-of-day closing prices just don’t capture the full extent of what actually goes on during the several hours of any regular session, and yesterday was certainly one of those times. We’ve been on top of front-end contango for some weeks now. At first wondering if merely an artifact of growing technical illiquidity as the lead contract lurches toward its expiration, then the...

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