Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.Sunday, December 21, 2008
Global Recession, Crashing Interest Rates Igniting Government Bond Bubbles / Interest-Rates / Recession 2008 - 2010
Duke University: CFO Survey – historic recession to last another year“Chief financial officers in the United States and around the world are more pessimistic than at any time in the history of the Duke University/CFO Magazine Global Business Outlook Survey. The majority of chief financial officers in the US and Europe say their firms will slash spending and employment in 2009, and their firms will post losses. The recession will last another year, according to nearly two-thirds of CFOs.
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Saturday, December 20, 2008
Fed Targeting Long-term Interest Rates to Force Mortgage Rates Lower / Interest-Rates / US Interest Rates
- I Meant to Do That
- The Lights of Myanmar
- Some Good News for Borrowers
- Madoff May Give Us a Sell-Off
The Fed has taken interest rates to zero. They have clearly started a program of quantitative easing. What exactly does that mean? Are we all now Japanese? Is the Fed pushing on a string, as Japan has done for almost two decades? The quick answer is no, but the quick answer doesn't tell us much. We may not be in for a two-decades-long Japanese malaise, but we will experience a whole new set of circumstances. In what will hopefully be a shorter holiday version of the e-letter, I will tackle these questions and more.
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Friday, December 19, 2008
The Greatest Wealth Transfer in the History of Mankind Starts Now! / Interest-Rates / Economic Depression
Right now, the Treasury, the Federal Reserve, and the banking system seem to be gearing up for an event the likes of which has never been seen. I believe the crisis that will unfold over the next few years will add up to the biggest economic event in history. The scale of what is happening will dwarf all other economic events combined. The Tulip mania of 1637, John Law's "Mississippi Scheme" of 1720, and the dot-com / tech bubble of 1999 will pale by comparison. Even the hyperinflation in Weimar Germany in 1923 and the Great Depression will seem like a walk in the park compared to what is coming.Read full article... Read full article...
Thursday, December 18, 2008
Bond Investors Turn Bullish on U.S. Treasuries / Interest-Rates / US Bonds
Here is a headline I am laughing at: Bond Investors Turn Most Bullish on Treasuries Since February
Treasuries will appreciate over the next six months as the U.S. economy reels from its worst recession in a quarter-century, a monthly survey of Bloomberg users showed.
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Wednesday, December 17, 2008
U.S. Fed Opts to Inflate Treasury Bond Bubble / Interest-Rates / US Bonds
Beware - “Quantitative Easing” is Hallucinogenic - American bankers are so fearful of a replay of the 1930's Great Depression, they've finally reached the point of "No-return," – lending $30-billion to Uncle Sam at a rock-bottom interest rate of zero-percent. Demand was so great at the last auction, the Treasury could have sold four-times as many T-bills. If short-term T-bill rates go negative, frightened bankers would effectively be paying the US Treasury for the privilege of lending money to it! But remember, "The Fed can guarantee cash benefits as far out, and at whatever size you like, but we cannot guarantee their purchasing power," former Fed chief, "Easy" Al Greenspan told Congress on Feb 15, 2005.Read full article... Read full article...
Wednesday, December 17, 2008
U.S. Treasury Bonds Soar Following Zero Interest Rates Policy / Interest-Rates / US Bonds
The extraordinary near-vertical advance in the Lehman 20 Year T-bond ETF (AMEX: TLT) continues, as yield on both the 10 and 30 year Treasuries plummets. Let's notice that for the first time in what I consider to be the "blow-off" stage (since 12./12), the TLTs have gapped up, which technically suggests strongly that the price structure has entered the final phase of the incredible "parabolic" move.Read full article... Read full article...
Wednesday, December 17, 2008
Fed Policy to Drive U.S. Dollar Lower to Prevent Deflation / Interest-Rates / US Dollar
Faced with the threat of deflation, the Federal Reserve (Fed) may be trying to drive the dollar lower to spur inflation. As policy makers don't want home prices to deteriorate further, an alternative is to inflate the prices of all other goods and services: as a result, the relative prices of homes would be less expensive. Weakening the dollar is an effective policy tool to drive up inflation as the cost of import goes up. Just be careful: the Fed may be getting more than it is bargaining for.Read full article... Read full article...
Wednesday, December 17, 2008
Fed Fights Deflation with Zero Interest Rates / Interest-Rates / US Interest Rates
The US Federal Reserve yesterday pulled out all the stops in a frantic effort to save the US economy from collapse and stem the deflationary forces. The Fed funds rate was slashed from 1% to a target range between 0 and 0.25% – the lowest the central bank's key rate has been since records began in 1954.Read full article... Read full article...
Wednesday, December 17, 2008
Quantitative Interest Rate Easing American Style: Free Money / Interest-Rates / US Interest Rates
The Treasury rally continued in spectacular fashion in conjunction with the ZIRP Arrival: Fed Targets Interest Rates 0 to 1/4 Percent .From the FOMC Press Release . The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level.
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Tuesday, December 16, 2008
Madoff Fraud and the U.S. Government Debt Ponzi Scheme / Interest-Rates / Scams
As the multi-billion dollar Ponzi scheme orchestrated by Wall Street insider Bernard Madoff unravels in the media spotlight, the nation is being presented with a rare opportunity to understand the true nature of many of our most cherished financial structures. Hopefully we have the wisdom to connect the dots.Read full article... Read full article...
Tuesday, December 16, 2008
Zero Interest Rates Policy Arrives as Fed Targets 0% to 0.25% / Interest-Rates / US Interest Rates
Effective today, the Fed is done cutting rates. ZIRP has arrived. The Fed is targeting interest rates in a range of 0 to 1/4 percent as noted today's FOMC Press Release .
Release Date: December 16, 2008 - For immediate release
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Tuesday, December 16, 2008
U.S. Treasury Bonds Blow-off Top? / Interest-Rates / US Bonds
The bond market just keeps on chugging higher. Yields on the 30 year Treasury Bond decreased for a 6 th consecutive weeks as the Long Bond future rallied an unprecedented 23 points since the end of October. If it looks like a duck, walks like a duck and quacks like a duck, then it must be just another blow-off top. It is really no big deal, blow-offs have been a dime a dozen this year, so there is no reason to get too excited.Read full article... Read full article...
Tuesday, December 16, 2008
Federal Reserve Characteristics of a Crime Syndicate Faces Lawsuits / Interest-Rates / Credit Crisis Bailouts
The principal missing piece in the grand American mosaic of banking destruction, corrupt collusion, fraudulent bonds, Wall Street control, suppressed regulators, compromised ratings agencies is JUSTICE . Foreign entities are aghast as the lack of prosecution, remedy, and removal from positions of power, as policy continues to be set by the participants responsible for the structural failure and prevalent fraud. Their actions are reaching climax levels. The climax of the Wall Street strangehold is the confiscation of the TARP funds to date. However, whatever has not been nationalized is subject to lawsuits . The pattern of human behavior indicates that lawsuits can spawn additional lawsuits, and quickly control is lost. It is open season on Citigroup, Bank of America, and perhaps other lesser players.Read full article... Read full article...
Monday, December 15, 2008
Any Confidence in Corporate America could send Corporate Bond Prices Higher / Interest-Rates / US Bonds
Cars – from the musical group to songs about various models (Little Deuce Coupe, Pink Cadillac) to songs about the road (Route 66, King of the Road) it is little wonder the market was captivated by the death dance in Washington regarding the auto companies. When it looked as though they would crash and burn, the markets indicated a 4-5% decline coming into Friday, only a willingness by the White House and the Treasury to use money earmarked for the financial sector, did the markets turn slightly higher on the week.Read full article... Read full article...
Saturday, December 13, 2008
Free Money with that Credit Default Swap? / Interest-Rates / Credit Crisis 2008
- Things That Should Not Be
- I'll Pay You to Hold My Cash
- Pushing on a String
- Free Money with that Credit Default Swap?
- Oil Does a Strange Contango Dance
- The Tragedy of Bernie Madoff
There are things in today's markets that are simply astounding. They should not exist, yet they do. Why should US bills trade at negative interest? How can oil be trading at all-time highs in terms of spreads over the next year? Bank debt and bonds are trading at discounts not to be believed. Want some free money? I show you a trade that gives you (almost) just that. Fed funds at zero? Are we starting to push on a string? We'll cover all this and more in this week's letter.
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Friday, December 12, 2008
Government Flood of Treasury Obligations Telegraphing Inflation / Interest-Rates / Inflation
A Nightmare Before Christmas - Like many pragmatic economists I have always warned that rapid expansions of government debt would result in inflation and higher interest rates. The explanation was always simple: rising supply of government debt inflates the money supply and weakens the government’s ability to service its debt through legitimate means.Read full article... Read full article...
Friday, December 12, 2008
Trillion Dollar Bailout Liabilities Desensitisation / Interest-Rates / Credit Crisis Bailouts
In the current climate, where the overriding opinion of most mainstream financial commentators is that deficit spending is a good thing and the only thing better than one bailout is two bailouts, it is time to inject a bit of logic and sanity.
Sure, I made the argument in last week's edition that IF the Feds are going to throw over $8 Trillion at the financial system which produces nothing, why not throw Big Auto a bone? At least they produce something. However, this line of reasoning should not be taken as any kind of endorsement of our Bail-o-Matic Congress or its actions.
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Friday, December 12, 2008
U.S. Bond Markets on the Edge of Collapse / Interest-Rates / US Bonds
Mike Larson writes: I thought I had witnessed a lot of craziness in the bond market over the past year:
• The utter obliteration of subprime mortgage bonds …
Friday, December 12, 2008
U.S. Treasury Bond Market Bubble Hits Manic Stage / Interest-Rates / US Bonds
This week marked the beginning of what I believe is the manic bubble stage in the nearly three decade long Treasury bull market. On Monday, the U.S. Department of Treasury sold $27 billion of three month bills at a discount rate of .005%. That rate is the lowest since the auction began in 1929. On Tuesday, $30 billion of four-week Treasury bills were sold at 0%! Again, the lowest yield ever recorded for that security.Read full article... Read full article...
Thursday, December 11, 2008
Fed Seeks to Issue Own Debt to Soak up Excess Liquidly / Interest-Rates / US Debt
The Credit Rating on a Benevolent Counterfeiters Debt - Infinity A? - In today's Wall Street Journal a trial balloon was floated with regard to the Fed issuing its own debt. This is akin to a counterfeiter issuing her own debt. There could never be a default. All the counterfeiter would have to do is print up some new currency to pay the interest on or redeem her debt. The Fed also possesses the power of the printing press, so it would never default on its debt. Of course, there is no guarantee what the future purchasing power of the payments would be to the Fed's creditors, but that is a different issue.Read full article... Read full article...