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Market Oracle FREE Newsletter

Analysis Topic: Interest Rates and the Bond Market

The analysis published under this topic are as follows.

Interest-Rates

Friday, May 24, 2019

The Fed Is Caught Behind The Curve / Interest-Rates / US Interest Rates

By: Avi_Gilburt

I have written many times about how the Fed follows the market and does not lead it. And, we are about to see yet another example of history’s lessons.

For those that followed our work over the years, you would know that we called for a top to the bond market on June 27, 2016, with the market striking its multi-year highs within a week of our call. Since that call, TLT dropped 22%, until we saw the bottoming structure develop in late 2018.

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Interest-Rates

Wednesday, May 22, 2019

Fed Encourages Runaway US Debt as “Minsky Moment” Approaches / Interest-Rates / US Debt

By: MoneyMetals

Federal Reserve officials like to pretend they can use interest rates like a motorcycle throttle on the U.S. economy. They can either rev things up by dropping interest rates or slow things down by moving rates higher.

The public has been led to believe the central planners can do whatever is needed with rates to keep things purring along.

The truth is the central planners at the Fed are meddling with forces beyond their control. They are encouraging consumers, companies, and government to take on debt. Soon, the nation will choke on it.

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Interest-Rates

Wednesday, May 15, 2019

This Unprecedented Credit Crisis Will Redefine How We Invest / Interest-Rates / Financial Crisis 2019

By: John_Mauldin

In the past few years, I wrote a lot about the unprecedented credit crisis I foresee. I call it “The Great Reset.”

I have to add, it isn’t what I think the future should look like or what I want to see. But almost the entire developed world has painted itself into a corner.

It might not be terrible. I don’t expect another Great Depression or economic upheaval, but the change will be profound.

We will have to adapt our portfolios and lifestyles to this new reality. The good news is big changes happen slowly. We have time to adapt.

I don’t see any plausible path to stopping the world’s debt overload without a serious crisis, much less paying it off. So I foresee a tough decade ahead.

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Interest-Rates

Tuesday, May 14, 2019

How US Debt Will Reach $40 Trillion by 2025 / Interest-Rates / US Debt

By: Harry_Dent

Smart people are worried about out deficit. They should be.

Never mind the chaos around the world (like mass shootings, terrorist bombings, Armageddon marches, etc. ad infinitum), it was recently report that Christine Lagarde, the managing director of the IMF, is “doubly concerned” about the level of global debt. She was speaking at the Milken Institute Global Conference last week, where she explained why excessive debt is going to become a serious problem for developed and developing countries alike.

In case you’re wondering – I had to look it up – the Milken Institute is a research driven, non-partisan think tank that develops policy initiatives aimed at increasing economic growth to improve the standard of living for people across the globe.

I assure you. The levels of global and U.S. debt are way beyond concerning. They’re also way beyond being repayable.
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Interest-Rates

Wednesday, May 08, 2019

How Fed Interest Rate Cycles Exponentially Reduce Long Term Wealth Creation / Interest-Rates / Economic Theory

By: Dan_Amerman

The most historically reliable way to create long term wealth is the reinvestment of cash flows over time, as earnings are earned on earnings, which are earned on earnings.

Compound interest is the best known example, but the same principle of compounding cash flows is also the most powerful and stable source of wealth with the stocks and real estate over the long term as well.

Reinvested (and increasing) dividends are a more important and stable source of stock market wealth than price gains.  Reinvested (and increasing) net cash flows are the most stable and important source of wealth with real estate and REIT investments as well.

However, what was taken for granted for many decades - is no longer available. As a result of Federal Reserve policies, only a small fraction of the historically average power of this wealth building engine still remains. In this analysis we will examine the mathematical implications of publicly stated Fed intentions if there is another recession, and look at the extraordinary implications for investors.

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Interest-Rates

Tuesday, May 07, 2019

US Federal Reserve Bank Vetoes Cain and Moore / Interest-Rates / US Federal Reserve Bank

By: BATR

If you ever had doubts just who is squarely in charge of the finances for the debt created U.S. Dollar currency, the nixing of Herman Cain and Stephen Moore for the Federal Reserve Board confirms that the Banksters are the real power. The Shadow Government is truly the elitists behind monetary hegemony that rules over government and economic policies. The institutions that shape and direct the financial dynasty of the reserve currency is outside the realm of Presidential compliance. Donald Trump has just experienced the push back from the Jackals of Jekyll Island.    

Clearly the Federal Reserve 100 Years of Failure has been the single most destructive financial factor in history. Over the last century the Merchantry economy has been systematically dismantled in favor of the Corporatocracy. The Wall Street establishment has always opposed entrepreneurs unless they go public with shares that the Masters of the Universe can manipulate. Both Cain and Moore have a long record of media appearances that often vary from the establishment viewpoint.

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Interest-Rates

Friday, May 03, 2019

The May FOMC Meeting Is Over. They Say Every Cloud Has a Silver Lining... / Interest-Rates / US Interest Rates

By: Arkadiusz_Sieron

The May FOMC statement didn’t bring much of a surprise. Fed Chair Powell remained upbeat in his assessment of the U.S. economy while dismissing low inflation as transitory. Gold has initially jumped, only to keep declining later. What has actually happened yesterday, then?

FOMC Statement Acknowledges Lower Inflation

Yesterday, the FOMC published the monetary policy statement from its latest meeting that took place on April 30-May 1. In line with expectations, the US central bank unanimously kept its policy rate unchanged. As previously, the inaction reflected the new patient approach adopted by the Fed in January. So, the federal funds rate remained at the target range of 2.25 to 2.50 percent:

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Interest-Rates

Thursday, May 02, 2019

The Fed Can’t Ease Interest Rates Until Stocks Collapse… / Interest-Rates / US Interest Rates

By: Graham_Summers

Yesterday’s Fed meeting had one clear message:

The Fed needs a reason to cut rates.

The Fed has obviously laid the ground work for a rate cut by hinting at easing… but with the “official” GDP numbers at 3.2% and inflation under 2%… the Fed doesn’t have a clear reason to ease just yet.

It will soon… and that reason is going to be a stock market collapse.

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Interest-Rates

Tuesday, April 30, 2019

A Look Inside the Scheme to Eliminate Cash and Impose Negative Interest / Interest-Rates / War on Cash

By: MoneyMetals

Central bankers and politicians love inflation, but they need “bag holders” to have faith in the value of the fiat currency IOUs they hold. The trick is to avoid suddenly destroying the ephemeral confidence in currencies by printing too much too fast.

Central bankers may also need to limit the options inflation wary citizens have for escaping.

They are both shifty and innovative when it comes to making sure the ill effects of perpetually devaluing currency are primarily borne by the citizenry.

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Interest-Rates

Monday, April 22, 2019

Global Bond Market Bubble’s Ultimate Culmination / Interest-Rates / International Bond Market

By: Michael_Pento

Historically speaking, a normal Fed tightening cycles consist of raising the Fed Funds Rate (FFR) by 350-425bps. It is at that point that the yield curve usually inverts--thus, disincentivizing future lending and closing down the credit conduit. At that point the Fed backs off from future rate hikes. Then, about a year later, a stock market meltdown begins; and six months after that a recession ensues. During this current cycle, the Fed Open Market Committee (FOMC) has raised rates by just 250bps before turning dovish. Therefore, Wall Street takes solace in the view that this time around the Fed stopped in time before it killed the business cycle.

However, that 250bps of hiking is before you factor in the end of Quantitative Easing (QE) and the current Quantitative Tightening Program (QT), which is still an ongoing process and won't end until September. When you factor in the tightening that occurred when the Fed ended QE in October of 2014, which amounted to $85b per month of newly printed money at its peak and added a total of $3.7 trillion to the Fed’s balance sheet, the actual amount of tightening from ending QE is probably close to 300bps. And, the QT from the Fed will end up draining nearly $1 trillion from its balance sheet and reached $40-$50 billion per month at its peak. A reduction in the Fed’s balance sheet of anything close to $1 trillion is completely unprecedented and amounted to a tremendous drain on liquidity. Nobody knows exactly the amount of rate hikes this equates to, but it most likely added another 75bps of monetary tightening.

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Interest-Rates

Thursday, April 18, 2019

Low New Zealand Inflation Rate Increases Chance of a Rate Cut / Interest-Rates / Global Financial System

By: ElliottWaveForecast

New Zealand CPI (Consumer Price Index) only grew by 0.1% in the three months to March with annual increase of 1.5%. This is well below the 0.3% rate expected by the market. The RBNZ (Reserve Bank of New Zealand) annual inflation target is between 1%-3%. The latest result falls at the lower end of the range. This has raised speculation that the RBNZ may cut official interest rate as early as next month.

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Interest-Rates

Friday, April 12, 2019

Trump Calls for New Quantitative Easing to Prop Up U.S. Economy / Interest-Rates / Quantitative Easing

By: MoneyMetals

As gold and silver markets continue in choppy trading this spring, bulls are hoping a dovish Fed will sink the dollar and lift the metals.

Now that the Federal Reserve is on “pause” – presumably for the rest of 2019 – perhaps investors can stop obsessing over interest rate decisions by central planners. Perhaps markets can finally trade based on actual market signals and underlying fundamentals. 

Perhaps ... not.

With 2020 election campaigns already underway, interest rate policy will be a political football in the months ahead. Incumbent administrations almost always favor lower interest rates heading into their re-election bids, and this one is no exception.

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Interest-Rates

Wednesday, April 10, 2019

Is The Federal Reserve ‘Too Big To Fail’? / Interest-Rates / US Federal Reserve Bank

By: Kelsey_Williams

The term “too big to fail” refers to certain businesses whose viability is considered critical to the survival and effective operation of our economic system. These very large businesses are designated as too big to fail because their failure or bankruptcy would have disastrous consequences on the overall economy.

The potential effects are considered to be severe enough, and the costs so unbelievably large, that these businesses are afforded special attention and consideration in the form of bailouts and protection from creditors.

The expenses necessary in order to save a large institution from bankruptcy are considered less than the costs that would be incurred if the institution were allowed to fail. Active application and implementation of both alternatives were prominently featured in the financial crisis of 2008.

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Interest-Rates

Wednesday, April 03, 2019

Trump Readies Shake-up of Fed Banking Cartel / Interest-Rates / US Federal Reserve Bank

By: MoneyMetals

Establishment journalists, establishment economists, and establishment politicians are freaking out. It seems they can’t cope with the prospect of an outspoken monetary reformer potentially becoming the next member of the Federal Reserve Board of Governors.

President Donald Trump announced recently he would nominate longtime free-market advocate and close political ally Stephen Moore to a currently vacant seat at the Fed.

“Trump’s choice of former campaign adviser Stephen Moore to serve on the Federal Reserve Board is stirring misgivings among some bankers,” reports Politico.

“Economists are furious,” according to QZ. “The news has been met with a heady combination of derision, bafflement, and general hullaballoo, with Moore variously described as ‘a loyalist, not an expert’.”

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Interest-Rates

Tuesday, April 02, 2019

Why Is the Fed Paying So Much Interest to Banks? / Interest-Rates / US Federal Reserve Bank

By: Ellen_Brown

“If you invest your tuppence wisely in the bank, safe and sound, Soon that tuppence safely invested in the bank will compound, And you’ll achieve that sense of conquest as your affluence expands In the hands of the directors who invest as propriety demands.” — “Mary Poppins,” 1964

When “Mary Poppins was made into a movie in 1964, Mr. Banks’ advice to his son was sound. The banks were then paying more than 5% interest on deposits, enough to double young Michael’s investment every 14 years.

Now, however, the average savings account pays only 0.10% annually—that’s one-tenth of 1%—and many of the country’s biggest banks pay less than that. If you were to put $5,000 in a regular Bank of America savings account (paying 0.01%) today, in a year you would have collected only 50 cents in interest.

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Interest-Rates

Tuesday, April 02, 2019

Inverted Yield Curve Fears Are Early / Interest-Rates / Inverted Yield Curve

By: John_Mauldin

Last week, the yield curve inverted for the first time since 2007. The yield for 10-year Treasuries fell below the yield for the 3-month T-Bill.
The inversion set off alarm bells and US stocks fell sharply. While concerns are reasoned, the alarm bells may be premature.

Inversion is an historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, although it’s likely.

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Interest-Rates

Sunday, March 31, 2019

Warning: Central Banks CANNOT Normalize Policy… Ever / Interest-Rates / Negative Interest Rates

By: Graham_Summers

As I have been warning for years, Central Banks CANNOT normalize the Everything Bubble they created between 2008 and 2016.

Yesterday, yet another major Central Bank confirmed that I was correct. In this particular case, it was the European Central Bank (ECB).

The ECB first cut interest rates to NEGATIVE in 2014. It then lowered them an additional three times to -0.4% in 2016.

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Interest-Rates

Wednesday, March 27, 2019

Yield Curve Has Inverted. Will Gold Rally Now? / Interest-Rates / Inverted Yield Curve

By: Arkadiusz_Sieron

The yield curve followed suit of the Fed and also inverted. Inverted yield curve is a sign of an incoming recession, they say. However, what is the background of this yield inversion and how will gold react to its emerging story?

Red alert! Or, actually, a yield alert! After months of worries, the yield curve has finally inverted. Well, maybe not the whole yield curve, but one of its segment. As one can see in the chart below, the spread between US 10-year Treasury and 3-Month Treasury dived on Friday to its lowest since 2007.

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Interest-Rates

Wednesday, March 27, 2019

Has The Fed Finally Lost Control Of US Interest Rates? / Interest-Rates / US Interest Rates

By: Avi_Gilburt

Back in the 1940’s, Ralph Nelson Elliott once noted:

At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend.

So, rather than be startled by the news of the past week, I have been trying to warn anyone who was willing to listen that if you want to know what the Fed is going to do, simply read the bond charts. You see, the Fed does not lead the market. Rather, the Fed follows the market. And, the market told me back in late 2018 that the Fed is about to fall behind the market.

Yet, almost every single person who reads this article will think I am crazy for saying something so ridiculous. Right? But, that is why I was prepared for the action seen in the bond market this past week, and not shocked as most participants seemed to be. In fact, one of my subscribers laughingly posted an article in our chatroom entitled "Riding the Bond Rally No One Saw Coming," while noting how our members were certainly quite prepared for this rally in the bond market.

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Interest-Rates

Tuesday, March 26, 2019

US Treasury Bond Yield Inversion and Political Fed Cycles / Interest-Rates / Inverted Yield Curve

By: Chris_Vermeulen

With so much news hitting the wires regarding the Treasury Inversion level and the “potential pending recession”, we wanted to shed a little insight into this phenomenon and what we believe the most likely outcome to be going forward.  Our researchers, at Technical Traders Ltd., believe the Treasure inversion is a reactionary process to overly tight US Fed monetary policies, consumer demand factors and outside cycle forces.  There is very little correlation to inverted Treasury levels and causation factors other than the US Fed and global central banks.  We believe consumers and consumer sentiment also play a role in setting up the conditions that prompt yield inversion.  The one aspect we believe everyone fails to consider is the uncertainty that is associated with major US election cycles.

The US Fed is obviously a driving force with regards to yields and consumer expectations.  In the past, the US Fed has rotated FFR levels up and down by enormous amounts (in some cases 200 to 500%+ over very short spans of time.  Consumers, you know those people, the ones that are the actual driving force of the local and state level economies, have been the the ones having to deal with wildly rotating FFR levels and the consequences of their debt rotating from 4~7% average interest rates to 8~25%+ average interest rates over the span of just a few years.

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