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Tag Archives: Yield Curve

(Open) Interesting: Where’d All The Love Go?

For awhile there, a few weeks anyway, the 30-year US Treasury long bond had become the star of the mainstream show. Showered with its 15 minutes of fame, everyone loved how, for once, it seemed to agree with Jay Powell and the preferred narrative about the effectiveness of his technocracy. The idiocy of this attention was exposed by just how little these suddenly aware Treasury market watchers had said about the thing for the several years before then. Like the yield curve, most people only...

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From QE to Eternity: The Backdoor Yield Caps

So, you’re convinced that low rates are powerful stimulus. You believe, like any good standing Economist, that reduced interest costs can only lead to more credit across-the-board. That with more credit will emerge more economic activity and, better, activity of the inflationary variety. A recovery, in other words. Ceteris paribus. What happens, however, if you also believe you’ve been responsible for bringing rates down all across the curve…and then no recovery. Just as the textbook said,...

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OMG The 30s!!!

I suppose you can admire their zeal and persistence, but then again what is a zealot without his or her zeal? The desperation by which to rescue the Fed’s money printing exercise is palpable. Stocks, sure, bonds, however, aren’t making it easy. Especially inflation expectations which are crucial to Jay Powell’s fairy tale.That whole flood. Over the last several days, Bloomberg (obviously) has been unusually and sharply focused on the 30-year long bond. The publisher like everyone else...

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No Flight To Recognize Shortage

If there’s been one small measure of progress, and a needed one, it has been the mainstream finally pushing commentary into the right category. Back in ’08, during the worst of GFC1 you’d hear it all described as “flight to safety.” That, however, didn’t correctly connote the real nature of what was behind the global economy’s dramatic wreckage. Flight to safety, whether Treasuries or dollars, wasn’t it.Back in March, while “it” was very obvious, even the New York Times put it the right way...

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The Reason For So Many Lies: He Finally Realizes He’s In Way Over His Head

This is not a man who’s comfortable thrust into a position of leadership. Say what you want about Ben Bernanke, and there’s a lot that still needs to be said, he at least carried on with the arrogance through thick and thin (almost entirely the latter). Jay Powell sounds like a boxer who just realized the lightweight he thought he was fighting put on 75 lbs of muscle and has been practicing by sparring with world champs.So, when he still says he’ll be the champ the words instead come out of...

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The Unpossibly Pure Signal

If a central bank controls the money supply, then it can, in theory, control inflation. And if it accomplishes this feat through the use of a short-term money rate, then what part of bond yields would lie beyond its power? None.That’s what bond yields are, after all, in theory the carrying forward of inflation expectations into the future built upon the foundation of short-term money rates. Since the Fed, for example, moves the federal funds rate around at will, and other money rates (used...

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Three Short Run Factors Don’t Make A Long Run Difference

There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to use in order to climb out of this mess have similarly narrowed. That’s what’s ultimately going to matter the most, not what comes next but what comes...

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Mor(e)on Collateral

The front end of the yield curve is flattened out near enough to zero. While the bill yields I noted this morning did not finish the day session with a negative, they were close and several have traded that way in the after hours session (as of this writing, the benchmark 3-month bill is -1 bps). This thing doesn’t end until they start doing something about the collateral situation. It is what has thwarted everything the Fed has thrown out there so far. Either this thing just keeps going and...

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Unprecedented in China, Yes, But Then What?

These numbers are essentially meaningless. They aren’t completely devoid of content, of course, just that such substance is of limited use. The Chinese have confirmed that their economy had shut down in the January-February period. The estimates for the Big 3 accounts were way below any and every consensus, thus demonstrating the severity of the disruption. First, the figures: Industrial Production in January and February 2020 was -13.5% from January and February 2019; Retail Sales -20.5%;...

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