For several weeks now, the Federal Reserve has launched one bazooka after another. Officials there keep reassuring the markets, and the public, they’ve got an unlimited toolkit. However, the fact that they feel it necessary to keep showing you is a warning sign, especially how quickly each one is forgotten and overshadowed by the latest Big New Thing. The reason [...]
Stocks took another beating last week as the scope of the coronavirus shutdown started to sink in. The S&P 500 was down 15% last week with most of that coming on Monday after the Fed’s emergency rate cuts. Our accounts performed much better than that, but were still down on the week as corporate and municipal bonds continued to get [...]
I knew long before they came out that it was going to be a shitshow, pardon my French. You don’t screw up that badly and let the worst global monetary crisis in four generations happen on your watch with it having been any other way. So, when the FOMC transcripts for 2008 finally came out early in 2014, I knew [...]
The Federal Reserve conducts reverse repo operations (RRP) daily, and has for more than half a decade. These are very different from the “liquidity” operations the central bank has been deploying since last year’s rumble in the repo market; the latter merely mimic a repo transaction and are intended to push bank reserves the Fed creates on the spot out [...]
Forward-looking data is starting to trickle in. Germany has been a main area of interest for us right from the beginning, and by beginning I mean Euro$ #4 rather than just COVID-19. What has happened to the German economy has ended up happening everywhere else, a true bellwether especially manufacturing and industry. The latest sentiment figures from ZEW as well [...]
The front end of the yield curve is flattened out near enough to zero. While the bill yields I noted this morning did not finish the day session with a negative, they were close and several have traded that way in the after hours session (as of this writing, the benchmark 3-month bill is -1 bps). This thing doesn’t end [...]
Negative Treasury rates are here. The front end of the yield curve fell below zero for the first time, the equivalent yield for the 4-week T-bill at -0.025% as I write this. The benchmark 3-month yield is straddling zero (while 3-month LIBOR jumps, as noted yesterday). These are not surprising developments. They are to Jay Powell and the people who [...]
Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either. Stocks rebounded because of “major helicopter stimulus” or because that’s just what [...]
It barely rated notice, not even a mention. On Saturday, March 7, just before all Hell broke loose, Lebanon announced it wouldn’t be repaying a $1.2 billion Eurobond issue which was coming due right on March 9. Normally people only notice this tiny country for some terrorist action or recall much about it beyond the civil war which had devastated [...]
The Fed unveiled what was supposed to be shock and awe. Instead, it was the predictable series of upsizing the bazookas, monetary armaments in name only. I’ll write it again: there is no money in monetary policy. Central banks are not central. That was the primary lesson of September’s repo rumble, and not for the first time since August 9, [...]
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