Analysis Topic: Interest Rates and the Bond Market
The analysis published under this topic are as follows.Monday, April 02, 2012
German Bunds Interest Rate Yield Pressing Support / Interest-Rates / Eurozone Debt Crisis
Starting a new month and a new quarter, U.S. 10 year YIELD remains rangebound, but looking like it is in a down-loop towards 2.00% again.
In our comparison chart between U.S. and German yield, notice that German 10-year yield is pressing against its key support plateau, and looks like it is about to break down, which probably is a warning either that some other negative surprise is approaching in Europe, or that the German economy is about to sputter -- or both. All of this will negatively impact U.S. growth and press Treasury yield lower, also impacting the iShares Barclays 20+ Year Treasury Bond ETF (TLT).
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Thursday, March 29, 2012
The National Debt Clock is Ticking / Interest-Rates / US Debt
U.S. Treasury Secretary Geithner said yesterday that the U.S. won't hit the debt limit (ceiling) unitl late in the year. Zerohedge has projected that the debt limit of $16'394 billion will be hit on September 14th, 2012. Presently the National Debt is at $15'596 billion according to the debt clock.
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Thursday, March 29, 2012
Martin Armstrong on the Sovereign Debt Crisis / Interest-Rates / Global Debt Crisis 2012
The Hera Research Newsletter is pleased to present a fascinating interview with Martin A. Armstrong, founder and former Head of Princeton Economics, Ltd. In the 1980s, Princeton Economics became the leading multinational corporate advisor with offices in Paris, London, Tokyo, Hong Kong and Sydney and in 1983 Armstrong was named by the Wall Street Journal as the highest paid advisor in the world.
As a top currency analyst and frequent contributor to academic journals, Armstrong's views on financial markets remain in high demand. Armstrong was requested by the Presidential Task Force (Brady Commission) investigating the 1987 U.S. stock market crash and, in 1997, Armstrong was invited to advise the People's Bank of China during the Asian Currency Crisis.
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Thursday, March 29, 2012
US Economy Hits Another Roubini Road-Hump: Is This The End? / Interest-Rates / US Economy
Nouriel Roubini made his name out of a paper he co-authored in 2003 with someone whose name I forget, and everyone else did too. His thesis then was that the U.S. Current Account deficit (basically a long word for the trade deficit in Goods and Services) was unsustainable, so there would be a meltdown.
He was actually wrong for the right reasons; his idea was that the demand for U.S. Treasuries by foreigners was not enough to finance the Trade/Current Account Deficit, that part was right.
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Thursday, March 29, 2012
ECB’s Cheap Funds – Waiting for a Turnaround in Lending / Interest-Rates / US Interest Rates
The European Central Bank’s (ECB) financial accommodation through the longer-term refinancing operation (LTRO) in December 2011 and February 2012 amounting to over 1 trillion euros has stabilized financial markets. But, the desired impact on bank lending is not visible yet. Granted, it is a bit too soon to expect positive signs, but it is an important aspect to track in the near term. The objective of LTRO’s is to prevent a severe disruption of the flow of credit to businesses and households. The February LTRO reached a larger number of institutions compared with the December package and included expanded collateral that enabled smaller financial institutions to participate.
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Thursday, March 29, 2012
Bill Gross on Bernanke Rolling Out QE3 in April / Interest-Rates / Quantitative Easing
PIMCO founder and co-CIO Bill Gross spoke with Bloomberg Television's Margaret Brennan today, telling Bloomberg TV that the Fed will likely shift focus to mortgage securities to keep borrowing rates low when Operation Twist ends in June.
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Wednesday, March 28, 2012
What Causes Interest Rates to Rise / Interest-Rates / US Interest Rates
The prevailing notion among the main stream media and economists is that interest rates are rising because of improving economic growth. But like many of the readily accepted tenets of today’s world of popular finance, this too has its basis in fallacy.Read full article... Read full article...
Tuesday, March 27, 2012
Quorum Sensing and Its Application to Computer Program Trading of Financial Markets / Interest-Rates / Learn to Trade
This article is going to throw another idea into the pot about computer based algorithms with an idea borrowed from Microbiology titled “Quorum Sensing”. Nature has been in the business of survival and evolution for billions of years, so it should come as no surprise to most that artificial intelligence and computer based design have been borrowed from studying the human mind. Now what do microbes have to do with how computer based trading is performed. A short-course in Microbiology will be required, but it will quickly be tied into how trading software is “sensing” its environment and how the common investor can use this knowledge to derail these trading patterns.
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Tuesday, March 27, 2012
Bernanke – Additional Monetary Accommodation Is Entirely Possible / Interest-Rates / US Interest Rates
Chairman Bernanke presented an extensive assessment of the labor market this morning. Bernanke repeated his depiction of the labor market as “far from normal,” which was his opinion at the February 29, 2012 semi-annual testimony to the Financial Services Committee of the House of Representatives. He listed positive developments in the labor market – the noticeable increase in payrolls in the three months ended February (+245,000, 3-month moving average), moderation in layoffs in the public sector, longer workweek, the drop in the unemployment rate from 9.0% in September 2011 to 8.3% in February 2012, and the declining trend of new jobless claims. On the negative side, he mentioned it is unclear if the recent gains in payrolls “will be sustained,” and listed another set of indicators to watch – jobless rate, long-term unemployment, and the rate of net hiring.
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Sunday, March 25, 2012
U.S. Treasury Bond 10-Year Yield Is Heading Up Above 6% / Interest-Rates / US Bonds
The last time the yield on the 10-Year US Treasury dipped below 2% was in 1941; just before (not just after), the Japanese attack on Pearl Harbor.
Perhaps then the recent 1.8% low was not just because of Euro-refugees, perhaps we are on the cusp of another Black Swan tail-risk potentially as devastating as World War II? Or perhaps there is another explanation?
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Wednesday, March 21, 2012
US Public Debt Growing at Unsustainable Rate / Interest-Rates / US Debt
We often blame Fed monetary policy for the GFC, with interest rates at exceptionally low levels leading to "Greenspan's bubble." Treasury was just as culpable, however, with the massive 2004-2005 surge in public debt flooding the market with liquidity. The repeat in 2008-2011 was more justifiable: the spike in public debt was necessary to offset the sharp decline in private (non-financial) debt which would have caused a deflationary spiral. The effect was to smooth out the fall in total domestic debt (public and private) and create a relatively "soft" landing for the economy.
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Wednesday, March 21, 2012
Peak Imbalances Are Falling, New Bear Market in Bonds / Interest-Rates / US Bonds
The topic at hand is the 10-year U.S. Treasury bond, its falling price, and consequent rising yield. The ten year was trading at a 2.03% yield on March 9 and rose to 2.38% on March 19, 2012. These things happen and the ten-year may fall back to a price and yield that satisfies central bankers and Wall Street. Nevertheless, the era of artificially low government bond yields is coming to a close.Read full article... Read full article...
Tuesday, March 20, 2012
Fed Spreading Financial Cancer That's Killing the Markets and Democratic Capitalism / Interest-Rates / Quantitative Easing
While the vast majority of commentators look at the market action of the last three months and celebrate, I cannot help but shudder. The reason is that the stock market has been propped up solely by Central Bank and/or Federal Government intervention or the hope of more intervention.
That alone is worrisome as it indicates the stock market no longer cares for economic or financial fundamentals (something that has been clear for several years now).
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Monday, March 19, 2012
Are the Efforts of the World Central Banks Working? / Interest-Rates / Central Banks
The Fed is not the world's only central bank dealing with debt. Watch as Steve Hochberg, EWI's chief market analyst, shows what has happened to GDP in countries around the world as other central banks try to "inject liquidity" into the system.
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Monday, March 19, 2012
Is There a Bubble in U.S. Treasury Bonds? / Interest-Rates / US Bonds
... Explaining the 2011 Treasury Rally (It's Not What You Think); Where to From Here?
People have been calling a bubble in treasuries for at least a decade. The shocking result, especially to hyperinflationists, has been a stair-step decline in yields for 30 years. That's quite a long time.
Here is a chart going back 20 years from Steen Jakobsen at Saxo bank in Denmark.
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Monday, March 19, 2012
American's Asleep At the Wheel Driving Into Debt Slavery / Interest-Rates / US Debt
Americans have an illogical love affair with their vehicles. There are 209 million licensed drivers in the U.S. and 260 million vehicles. The U.S. has a higher number of motor vehicles per capita than every country in the world at 845 per 1,000 people. Germany has 540; Japan has 593; Britain has 525; and China has 37. The population of the United States has risen from 203 million in 1970 to 311 million today, an increase of 108 million in 42 years. Over this same time frame, the number of motor vehicles on our crumbling highways has grown by 150 million. This might explain why a country that has 4.5% of the world’s population consumes 22% of the world’s daily oil supply. This might also further explain the Iraq War, the Afghanistan occupation, the Libyan “intervention”, and the coming war with Iran.
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Sunday, March 18, 2012
U.S. Treasury Bond Market Sell Off / Interest-Rates / US Bonds
Slightly off topic Macro View this week as I really want to study the movement in treasury. The 10 year treasury yield is currently 2.30% which from an historical standpoint is very low. But a 33 basis point rise in one week is significant (100 basis points equal 1%). If the sell off in treasury accelerates things can get out of hand in very short order.
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Sunday, March 18, 2012
The Fed Gets Creative, Buying Long-term Bonds / Interest-Rates / US Bonds
According to a story in Wednesday’s Wall Street Journal, the US Federal Reserve is considering buying long-term Treasury and mortgage bonds in return for deposits held at the Fed. There has been no comment from the Fed and the story might have been no more than a trial balloon, in which case Bernanke and Co may be considering skewing the yield curve so that long-term bonds are less attractive than the time-preferences set by the market.
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Friday, March 16, 2012
Lesson from Tracking the U.S. 10-Treasury Note Yield / Interest-Rates / US Bonds
The 10-year U.S Treasury note yield is trading at 2.28% as of this writing, little changed from 2.29% yesterday. But, this is a 25 bps uptick in two trading days, given the March 12 closing quote of 2.04%. The reasons listed for the sharp sell-off are – the less dovish policy statement of the Fed, February retail sales numbers, the success of the stress test of the largest 19 banks of the nation, the resolution of the Greek debt crisis, the improvement of employment conditions seen in the February employment report, the optimism from equity price rally, and so forth. The main takeaway is that as the list of positive economic signals grows, long rates move up in a hurry.
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Thursday, March 15, 2012
The Big Fat Greek Lie Is Now Obvious to Spain… So Who’s Next to Debt Default? / Interest-Rates / Eurozone Debt Crisis
The big fat Greek lie being spread throughout the financial community is that Greece has been saved. It’s a lie for the following reasons:
1) Greece did in fact default
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