Tag Archives: Interest rates

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 Fed's 50 bp rate hike is behind us.  Another 50 bp hike is expected next month. The April employment report will do little to calm the anxiety about the "too tight" labor market.  The decline in the participation rate was disappointing and this coupled with decline in Q1 productivity raies questions about the economy's non-inflationary speed limit.    One of the fascinating things about the markets is that sometimes the cause take place after the effect.  This...

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?...

Overview: Benchmark 10-year bonds yields in the US and Europe are at new highs for the year.  The US yield is approaching 2.90%, while European rates are mostly 5-8 bp higher.  The 10-year UK Gilt yield is up nine basis points to push near 1.98%. The higher yields are seeing the yen’s losing streak extend, and the greenback has jumped 1% to around JPY128.45  The dollar is trading lower against the other major currencies but the Swiss franc. The dollar-bloc 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...

I don’t know the answer to the question posed in the title. No one does because the future is not predictable. I don’t know what will happen in Ukraine. I don’t know how much what has already happened there – and what might – matters to the US and global economy. I don’t know if the Fed is making a mistake by (likely) hiking interest rates by an entire 1/4 of 1% this week. I can only see things as they are today and think about similar times in the past and know that...

Crude oil prices rose over 25% last week and as I sit down to write this evening the overnight futures are up another 8% to around $125. Almost every other commodity on the planet rose in prices last week too, as did the dollar. Those two factors – rising dollar and rising commodity prices – mean the likelihood of recession in the coming year has risen significantly in just the last week. Rising oil prices, in particular, have been a regular feature of past...

I’ll just get this out of the way right at the beginning. The question in the title of this post refers to the end of the ongoing stock market correction and the answer is likely no. There are no sure things in this business so it isn’t an unequivocal no, but based on history, the odds favor more weakness. I know a lot of people liked that rally into the close on Friday and it was a nice way to end a wild week but it also shows that traders/investors are all too...

It’s not hard to reason why there continues to be this conflict of interest (rates). On the one hand, impacting the short end of the yield curve, the unemployment rate has taken a tight grip on the FOMC’s limited imagination. The rate hikes are coming and the markets like all mainstream commentary agree that as it stands there’s nothing on the horizon to stop Jay Powell’s hawkishness. And yet, on the other hand, growth and inflation expectations, the long end could...

Fear tends to manifest itself much more quickly than greed, so volatile markets tend to be on the downside. In up markets, volatility tends to gradually decline. Philip Roth Be fearful when others are greedy and be greedy when others are fearful. Warren Buffett The new year hasn’t gotten off to a great start for growth stocks or any of the other speculative assets that have drawn so much attention over the last couple of years. Bitcoin is down 25% since the...