Tag Archives: currencies

The yield curve inverted last week. Well, the part everyone watches, the 10 year/2 year Treasury yield spread, inverted, closing the week a solid 7 basis points in the negative. The difference between the 10 year and 2 year Treasury yields is not the yield curve though. The 10/2 spread is one point on the Treasury yield curve which is positively sloped from 1 month to 3 years, negatively sloped from 3 years to 10 years and positively sloped again from 10 out to 30...

A nod to just how backward and upside down the world is now. The economic data everyone is made to pay attention to, payrolls, that one is, in my view, irrelevant. As is the consumer price estimates from earlier this week, the PCE Deflator. That’s another one which receives vast amounts of interest even though it is already old news. Yet, in the very same data release as the PCE, some other accounts importantly tied to labor, personal income, they slip unnoticed...

There’s an old Wall Street maxim that the cure for high commodity prices is high commodity prices. As prices rise two things will generally limit the scope of the increase. Demand will wane as consumers just use less or find substitutes. Supply will also increase as the companies that extract these raw materials open new mines, grow more crops or drill new wells. The combination of those two will act to bring prices back down until the process reverses. As prices...

To begin with, the economy today is absolutely nothing like it had been almost thirty years ago. That fact in and of itself should end the discussion right here. However, comparisons will be made and it does no harm to review them. I’m talking about 1994, or, more specifically, the eleven months between late February 1994 and early February 1995. Fearing inflation (the only time in its history, including much of the Great Depression, the Fed didn’t fear inflation...

With the Fed (sadly) taking center stage last week, and market rejections of its rate hikes at the forefront, lost in the drama was January 2022 TIC. Understandable, given all its misunderstood numbers are two months behind at their release. There were some interesting developments regardless, and a couple of longer run parts that deserve some attention. Picking up where TIC left off from December, when more indicated bad (tight money) than good (not as tight),...

The Federal Reserve didn’t just raise the range for its federal funds target by 25 bps, upper and lower bounds, it also added the same to its twin policy tools which the “central bank” says are crucial to maintaining order in money markets thereby keeping federal funds inside the band where it is supposed to be. The FOMC voted to increase IOER from 15 bps to 40 bps, and the RRP from 5 bps to 30 bps. That RRP, or reverse repo program, is meant to be something of a...

The Federal Reserve did something today, or actually announced today that it will do something as of tomorrow. And since we’re all conditioned to believe this is the biggest thing ever, I’ll have to add my own $0.02 (in eurodollars, of course, can’t be bank reserves) frustratingly contributing to the very ritual I’m committed to seeing end. We shouldn’t care much about the Fed. Live look at Jay Powell’s press conference.#ratehikeshttps://t.co/leCyV8Wak4...

Securities lending as standard practice is incredibly complicated, and for many the process can be counterintuitive. With numerous different players contributing various pieces across a wide array of financial possibilities, not to mention the whole expanse of global geography, collateral for collateral swaps have gone largely unnoticed by even mainstream Economics and central banking. This despite the fact, yes, fact, securities lending was the epicenter of the 2008...

With the 7s10s already inverted, and the 5s today mere bps away, making a macro case for the distortion isn’t too difficult. Despite China’s “upside” economic data today, even the Chinese are talking more about their downside worries (shooting/hoping for “stability”) than strength. In the US or Europe, no matter the CPIs in either place there are cyclical (not just inventory) warning signs all over the place. Aside from these economic concerns, is there a pure money...

This week will almost certainly end up as a clash of competing interest rate policy views. Everyone knows about the Federal Reserve’s upcoming, the beginning of what is intended to be a determined inflation-fighting campaign for a US economy that American policymakers worry has been overheated. The FOMC will vote to raise the federal funds range (and IOER plus RRP) for the first time since December 2018 Over in China, however, it’s nearly certain to be the opposite....