Tag Archives: bonds

For once, I find myself in agreement with a mainstream article published over at Bloomberg. Notable Fed supporters without fail, this one maybe represents a change in tone. Perhaps the cheerleaders are feeling the heat and are seeking Jay Powell’s exit for him? Whatever the case, there’s truth to what’s written if only because interest rates haven’t been rising based on rising inflation/growth expectations. Quite the contrary, actually. It’s all FOMC and the...

The bond market is allegedly populated by the “smart” set, whereas those trading equities derided as the “dumb” money (not without some truth). I often wonder if it’s either/or. The fixed income system just went through this scarcely three years ago, yet all signs and evidence point to another repeat. So, how smart can Eurobond agents really be if they’ve gone and done it again? What is it? Let’s roll the clock back to the landmine of 2018. Collateral shortage,...

Are the industrial commodities starting to get a whiff of demand side rejection? Short run trends suggest that this could be the case. From copper to iron and the highest (formerly) of the high flyers, aluminum, this particular group has been exhibiting a rather synchronized setback going back to the end of March, start of April. This despite supply bottlenecks and production shortfalls which continue to plague each. Copper has now fallen to its lowest since last...

Cue up the old VHS tapes of Bill Clinton. The former President was renowned for displaying, anyway, great empathy. He famously said in October 1992, weeks before the election that would bring him to the White House, “I feel your pain.” What pain? As Clinton’s chief political advisor later clarified, “it’s the economy stupid.” Jay Powell is no retail politician in near the same company as Mr. Clinton. Yet, the Federal Reserve’s current Chairman is attempting to...

This is the difference, though in the end it only amounts to a matter of timing. When pressed (very modestly) on the slow pace of the ECB’s “inflation” “fighting” (theater) campaign, its President, Christine Lagarde, once again demonstrated her willingness to be patient if not cautious. Why? For one thing, she noted how Europe produces a lot of stuff that, at the margins of its economy, make the whole system go. Or don’t go, as each periodic case may be: Europe in...

It’s never just one thing or another. Take, for example, collateral scarcity. By itself, it’s already a problem but it may not be enough to bring the whole system to reverse. A good illustration would be 2017. Throughout that whole year, T-bill rates (4-week, in particular) kept indicating this very shortfall, especially the repeated instances when equivalent bill yields would go below the RRP “floor” and often stay there for prolonged periods. There was, as I wrote...

This is one of those cases when Inigo Montoya, the lovable if fictional rapscallion from the movie The Princess Bride, would pop into the scene to devastatingly deliver his now famous rebuke. Last week, China’s one-man Dear Leader said that the country was going to start up its own version of Build Back Better. Immediately cheered by the entire Western media, every single news story contained the same phrase. “All out.” Cue Mr. Montoya’s wry witticism. . Did...

It’s one of those things which everyone just accepts because everyone says it must be true. If the US$ is rising, what else other than the Federal Reserve. In particular, the Fed has to be raising rates in relation to other central banks; interest rate differentials. A relatively more “hawkish” US policy therefore the wind in the sails of a “strong” dollar exchange regime. How else would we explain, for example, the euro’s absolute plunge since around May last year?...

Stagflation. It’s a word that strikes fear in the hearts of investors, one that evokes memories – for some of us – of bell bottoms, disco, and Jimmy Carter’s American malaise. The combination of weak growth and high inflation is the worst of all worlds, one that required a transformational leader and a cigar-chomping central banker to defeat the last time it came around. Or at least that’s how it’s remembered. Whether the cigar-chomping central banker was really...

According to today’s advance estimate for first quarter 2022 US real GDP, the third highest (inflation-adjusted) inventory build on record subtracted nearly a point off the quarter-over-quarter annual rate. Yes, you read that right; deducted from growth, as in lowered it. This might seem counterintuitive since by GDP accounting inventory adds to output. It only does so, however, via its own rate of change; the second derivative for specifically the difference....