Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.Sunday, January 25, 2015
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy / Interest-Rates / Quantitative Easing
Let’s say you’re diagnosed with colorectal cancer. But instead of going to a professional for help, you decide to treat yourself with glycerol suppositories and high doses of Vitamin C.Well, then, you’re probably going to die, right?This same rule applies to economics. If you try to reduce unemployment and boost growth by doing something completely unrelated to the problem itself, like dumping trillions of dollars into financial assets, then you’re not going to get the results you want.This is largely the problem we face today. All of the economies controlled by the western bank cartel–Australia, Canada, US, UK, Eurozone, and Japan—are suffering from chronic lack of demand, the likes of which could be easily remedied by following Keynes recommendation of “government directed investment”.
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Sunday, January 25, 2015
The European Central Bank Commits Monetary Suicide / Interest-Rates / ECB Interest Rates
Yesterday the European Central Bank (ECB) announced an expanded 1.1 trillion euro (US$1.3 trillion) asset purchase program to start in March 2015 and continue through September 2016 (19 months) that will include the purchases of sovereign (national government) debt. It plans to purchase roughly 60 billion euros ($68 billion) worth of securities monthly, up from about 13 billion, with most of the additional purchases to be allocated to sovereign (national government) debt with a quarter expected to end up in scarce German bunds. The purchases will be restricted to investment grade issues, which would mean no purchases at all if the condition were applied diligently, and will include non investment grade issues like Greek bonds if they have an ongoing budget/spending agreement with the ECB-IMF in place.
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Friday, January 23, 2015
Euro-zone 'QE already Working' Says IMF Lagarde / Interest-Rates / Quantitative Easing
Today, ECB president Mario Draghi announced his much awaited QE program that will allegedly save Europe from the imaginary perils of price deflation. See Deflation Bonanza! (And the Fool's Mission to Stop It).
Stocks are up a bit, the dollar is up a bit, the yen is up a bit, and gold is up a bit. Oil is down a bit.
The details are more or less along the lines most thought, not the celestial "big bang" that everyone hoped.
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Friday, January 23, 2015
Is 1.2 Trillion Euros The Right Answer To The Wrong Question? / Interest-Rates / Quantitative Easing
Good News Or Bad News?
Once upon a time something good happened for Europe. The price of oil went down dramatically. When the oil price halved in the last months of 2014, there was no way for the European Central Bank (ECB) to fulfill its mandate of keeping price growth close to 2 percent a year. The ECB painted itself into a corner by targeting headline inflation, not core inflation, which excludes food and energy. Left with no choice, the ECB announced on 22nd January 2015 that it would begin printing digital money in large quantities, ie, start Quantitative Easing or QE in the near future. Contrary to popular myth, QE doesn't fight 'deflation', it rather causes it by keeping zombie banks alive. Why? Quantitative easing simply buries money in commercial bank vaults, by bolstering their balance sheets, when it is cash in circulation that is desperately needed.
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Thursday, January 22, 2015
Are Plunging Petrodollar Revenues Behind the Fed’s Projected Rate Hikes? / Interest-Rates / US Interest Rates
Why is the Fed threatening to raise interest rates when the economy is still in the doldrums? Is it because they want to avoid further asset-price inflation, prevent the economy from overheating, or is it something else altogether? Take a look at the chart below and you’ll see why the Fed might want to raise rates prematurely. It all has to do with the sharp decline in petrodollars that are no longer recycling into US financial assets.
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Monday, January 19, 2015
Where Would Interest Rates Be If The Fed Didn't Exist? / Interest-Rates / US Interest Rates
On January 7th CNBC's Rick Santelli and Steve Leisman engaged in a heated debate that posed an interesting question; is the free market at work keeping interest rates low, or is it the central banks' put? This made me consider the real question to ask which is: Where would rates be if central banks didn't exist?
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Saturday, January 17, 2015
ECB Euro-zone QE Money Printing Program Taking Shape / Interest-Rates / Central Banks
More and more it appears as if we are going to get some form of QE next week out of the ECB. The big question is the size and scope of the program that most expect to be announced.
There has been some discussion as to whether the ECB would buy various government bonds across the board or whether the actual Central Banks of the respective Euro zone nations would buy their own government bonds as the composition of the actual bond buying program.
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Saturday, January 17, 2015
Swiss Storm - Central Banks Upside Down / Interest-Rates / Central Banks
The Swiss have unleashed a pretty wild storm in financial markets. All sorts of companies and people today are licking their wounds, and quite a few will simply have to fold. It’s no exception to be so leveraged in foreign exchange wagers that a move of a few percent can wipe you out, let alone one of 30%. Leverage makes sure that right off the bat a whole bunch of foreign exchange brokers, including FXCM, the biggest, are literally dead in the water – FXCM stock fell 90% -.
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Friday, January 16, 2015
Will the ECB Soon Fire Up the Printing Presses? / Interest-Rates / Quantitative Easing
There is growing anticipation that the European Central Bank will pull the QE (quantitative easing) trigger at its upcoming meeting on January 22nd. Never mind that such an action explicitly violates article 104 of the Maastricht treaty (article 123 of the Treaty for the Functioning of the European Union):
“Overdraft facilities or any other type of credit facility with the ECB or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.”
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Friday, January 16, 2015
The Next Subprime Debt Crisis Has Already Started / Interest-Rates / US Debt
Shah Gilani writes: Reading about what's going on in the subprime auto lending space is a lot like reading about drive-by shootings.
Unless you're a subprime borrower, or live in a neighborhood where drive-bys are happening, you probably don't know much about either or think they affect you.
But if you listen closely there's muffled financial "gunfire" already in your neighborhood.
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Sunday, January 11, 2015
U.S. Treasury Bonds Elliott Wave Long View / Interest-Rates / US Bonds
Unfortunately, this chart doesn’t go back prior to 1990, but there are clues that tell me where we are in the Elliott Wave structure. Wave III, for example, is exactly 12.9 years long. It is followed by a Triangle Wave IV, which is 3.87 years long.
Wave V is nearing an end. It is trading in a very straight trading channel. (It looks managed, don’t you think?) It is highly probable that the end of the T-bond uptrend may get a little help from a decline in equities. If so, a peak between the end of April and mid-May in bonds may correspond very neatly with the next potential bottom in the SPX. In other Words, the “flow” will be out of stocks and into bonds.
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Friday, January 09, 2015
The Hidden Perils of Low Interest Rates / Interest-Rates / US Interest Rates
Late last year, with the U.S. economy experiencing falling unemployment and seemingly low inflation, observers were extremely confident that the Federal Reserve would move judiciously in 2015 to restore 'normal' interest rates sooner rather than later. However, in light of the recent fall in both stocks and oil, that conviction has softened considerably.
Many, such as the very influential Bill Gross, now believe that our current Zero Interest Rate Policy (ZIRP), which has been in place for six years, will remain in place throughout the year. While this likelihood is a disappointment to many, who would have preferred to see the economy move along without Fed-supplied training wheels, few really understand the pernicious effects these policies are inflicting on the economy the longer they are held in place. In short, ZIRP is slowly transforming the world economy into a dysfunctional basket case.
Tuesday, January 06, 2015
U.S. Treasury Bond Bull Market Refuses to Die / Interest-Rates / US Bonds
Call this the market that simply will not die. As mentioned in some previous posts, just about the time one thinks that this market is finally ready to turn lower marking the onset of the end of the ultra-low long term interest rates and the inception of the new trend towards higher rates, back up it goes and down go the rates.
Between US investors seeking safe havens due to slowing growth and falling crude oil prices, and foreign investors looking for higher yielding alternatives to their own government bonds, ( which pay next to nothing not to mention the currency risk that they are exposed to thanks to the soaring US Dollar), bond bears haven't a chance in here.
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Wednesday, December 17, 2014
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates / Interest-Rates / UK Interest Rates
Reasons or Excuses?
The reasons for the Fed not raising rates keep getting more bizarre and outside the scope of what used to constitute the Fed`s purview. First it was the financial crisis, then it was GDP growth not being up to par, then it was inflation not being robust enough, then it was employment being too soft, next it became China is slowing, then it became Europe is slowing, then it was Wall Street will sell off and there will be too much volatility, then it became lack of wage growth, next it was the Dollar was too strong, and now it is that Energy is too cheap. I am sure I missed at least 5 other reasons that have come and gone for the Fed not raising rates over the last 7 plus years of this ZIRP Fed Wall Street Welfare program.
Tuesday, December 16, 2014
U.S. Bond Market Bubble is Reaching Epic Proportions / Interest-Rates / US Bonds
The 10-Year Bond now has a Yield of 2.08% right before the all-important Fed Quarterly Meeting and Press Conference this Wednesday, the 10-Year basically lost 24 basis points in a week, and mind you the week right after the strongest Employment Report (a positive 321,000 jobs added for the month) since the Financial Crisis, capping what has been a remarkable year in added jobs to the US economy, even wages spiked 0.4 % with strong upward employment revisions for the prior months. In short, in a normal functioning Bond Market Yields should be rising with improved economic conditions. Especially in a week with a robust Retail Sales Report up 0.7 % for the month. Bond Yields in the US should be much higher given the strong economic performance for 2014, and the Fed not only exiting QE, but about to start raising rates in 2015.
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Tuesday, December 09, 2014
More Washington DC Lies on Debts and Spending / Interest-Rates / US Debt
Mark Brandly writes: ”Recently, the Treasury Department secretary asserted that “The President’s policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds — the fastest sustained deficit reduction since World War II.” And, “the deficit in FY 20141 fell to $483 billion.”
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Tuesday, December 09, 2014
Debt, Default, and Taxes (DDT) Are Poison / Interest-Rates / US Debt
The official US National Debt is about $18,000,000,000,000, or 57 times the current market price of the US gold SUPPOSEDLY stored at Fort Knox, the NY Fed, and elsewhere. With so much paper in the system it is easy to see why the Fed publicly denigrates gold.
In the single year from Sept. 30, 2013 to Sept. 30, 2014, the US official national debt increased by over three times the value of all the gold that the US supposedly owns. The total debt and the increase in that debt is clearly “a problem.”
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Tuesday, December 09, 2014
Welcome to the Brave New World of Central Bank Tyranny / Interest-Rates / Central Banks
Shah Gilani writes: Remember when banks used to make it worth your while to deposit cash with them?
Heck, if you’re old enough you probably even remember such inducements as free toasters.
But in a reprehensible turn of events, now you – the depositor – are about to get toasted.
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Sunday, December 07, 2014
Why the Fed Won’t Raise Interest Rates in 2015 / Interest-Rates / US Interest Rates
Alexander Green writes: U.S. short-term interest rates have stayed near zero for six years.
But if there’s one thing investment analysts of all stripes can agree on now, it’s that the Fed will start gradually raising rates in 2015.
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Wednesday, December 03, 2014
World Slides Deeper into the Dangerous "Helicopter Money" Delusion / Interest-Rates / Quantitative Easing
Peter Krauth writes: If it seems to you that central banks and government leaders have run out of ideas, you're not totally wrong.
Indeed, the latest move by Japan smacks of pure desperation, and it might seem silly if it wasn't already an idea that's been floated before.
In fact, we may yet have the chance to see "helicopter money" and its effects after all.
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