There was nothing surprising in Federal Reserve Chairman Janet Yellen’s press conference yesterday. While some “investors” may have been shocked about where policy was headed, some parts of the credit markets have been anticipating this course right along (more on that later). Whatever may be expectations for QE and “forward guidance”, the FOMC is using the unemployment rate to provide [...]
It is somewhat of a fair criticism that playing armchair quarterback years after events unfolded amounts to lazy or devalued analysis. Picking apart assessments with the full benefit of hindsight is seemingly unfair to the participants and targets of any reproach. It also may appear to be irrelevant to spend so much time when current events demand more attention and [...]
So far in China this year there have been defaults and “bailouts” in the credit markets, but they are tiny in relative comparison to everything else. That they have occurred at all is why they have grabbed so much attention. We all have some inkling of the credit and monetary inequities that are roiling inside the Chinese economic gut, but [...]
Not to revisit Minsky too much, but the crux of the idea is that debt saturation is finite as it can never be uniformly or dynamically efficient. The Chinese seem very much intent on “proving” that idea (as if it needed even more empirical confirmation). Last year Chinese authorities, through various channels, wanted the world to know without a doubt [...]
Despite now two doses of QE taper and much more confirmation that the FOMC will be committed to that course, gold prices have not collapsed. Conventional wisdom has been uniform in believing QE as inflationary, and thus a positive for gold prices (despite the trajectory since 2011). Removal of QE should have been, if this thinking is correct, a negative [...]
It is exceedingly difficult to interpret the data in any other manner. That is bolstered greatly by reality of the post-taper environment, where issuance has declined dramatically. Yet, it was the talk of taper originally that set that decline in motion, echoing the feedback effects of this “extraordinary” monetary intrusion. Since Bernanke’s QE3 promise back in September 2012, repo volumes [...]
As per usual, gold prices followed forward rate movements. GOFO is again negative out to 2-months and is hinting negative for the 3-month rate. The 6-month forward rate is moving uite a bit lower, and even out to 1-year there has been a few bp drop in the rate. Bottom line: collateral issues abate; physical shortage reappears. In truth, the [...]
On Monday, September 9, there was a computer-related glitch in the US Treasury’s auction system that for some as yet unexplained reason did not allocate any of the 3-month bill issue to Goldman Sachs. The treasury made up for that by over-allocating in the 6-month issue, thus creating some pricing anomalies that caused a minor stir in repo and collateral [...]
If the Financial Times report is to be believed, and there is no indication contrary, then FRBNY took warnings earlier this year to heart and began investigating. FT links a February speech by Fed Governor Jeremy Stein about “overheating credit markets” to what looks like an ongoing probe of bank exposure to mortgage REITs. “The worry is that MReits could [...]
The third and latest gold/collateral episode appears to have been related to the debt ceiling, and so it would make sense that gold prices would now be able to shake off the collateral side and resume on a physical shortage basis. Forward rates were most negative on August 22. The sudden move upward in GOFO began on August 27 (as [...]
Stay In Touch