Monetary policy is rendered by the FOMC in Washington, but the operational end is conducted by the Open Market Desk at the Federal Reserve Branch in New York (FRBNY). The “desk” won’t conduct policy operations with just any counterparty, however. The Fed “carefully” screens potential banks for several characteristics that make them worthy of doing business. These chosen few are [...]
The JC Penney bond curve finally got the message this week that the company is in serious jeopardy, teetering close to collapse. The stock has been trending lower since February 2012, having lost some 70% from that peak (an amazing feat considering the sheer amount of asset inflation since then). The bond market, usually where trouble is first detected, has [...]
Chairman Bernanke stole the show yesterday, certainly by his accommodative and now contradictory stand. I suppose that is the danger in trying to talk “markets” toward “targets”, much like Greenspan in the late 1990’s. Toward that end, he made at least one prediction that will likely come true (in sharp contrast to the Fed’s history), namely that the unemployment rate [...]
To me the idea of taper is easily explained by two words: asset inflation. You may feel compelled to add a third, uncontrolled, but until more empirical evidence is garnered (price collapses) I will at present refuse the license. The cloak to this game has been “the improving economy”, as the former Fed doves tell it, the economy is now [...]
Clearly the Federal Reserve has taken seriously the consequences of QE and its relation to asset prices in so many markets. That itself represents a leap forward as perhaps the central planners in the Marriner Eccles building in Washington, DC, are beginning to understand that markets are not classroom exercises. In this bizarro world of unintended consequences, stocks actually are [...]
When even Eric Rosengren, Boston Fed President, is thinking about “tapering” you know something is a tad askew in FOMC-land. Again and again, these doves (including Charles Evans at the head of the Chicago Fed branch) had advocated the heaviest of hands of monetary intervention. QE 3 & 4 could not have been big enough for this cabal. Now in [...]
The talk of tapering QE has been incessant the past few weeks, no doubt playing a huge role in the volatility of the US Treasury market (as if there is some competition with the JGB market). Yesterday’s dramatic selloff has been absurdly linked to consumer confidence numbers and “improving” economic fundamentals, as if bond rates suddenly care about improving consumer [...]
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