us treasuries

The Bond Market Riddle Is Not A Riddle

By |2016-07-21T19:12:10-04:00July 21st, 2016|Bonds, Economy, Federal Reserve/Monetary Policy, Markets|

In January 2011, FRBNY began surveying primary dealers in order to try to gain a better understanding of how normalizing policy after two large (in their terms) programs of quantitative easing might affect money and bond markets. The banks were asked a series of questions, an array that has evolved over time, mostly about expectations for the future track of [...]

Only Spreading Monetary ‘Tightness’

By |2016-07-08T18:38:58-04:00July 8th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

As an apparent consequence of post-Brexit uncertainty, the effective federal funds (EFF) rate moved up from 38 bps in “yield” to 40 bps, and then even 41 bps on June 27. That rather tame reaction is due to the fact that there is nobody aside from primarily GSE leftovers trading in federal funds. That the market rate moved even 3 [...]

The Warning Embedded Within The Interest Rate Fallacy

By |2016-06-28T18:28:57-04:00June 28th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

On November 4, 2010, then-Federal Reserve Chairman Ben Bernanke wrote his infamous oped for the Washington Post “welcoming” the world to a second round of quantitative easing. The very fact that there was a second iteration belied the whole point of “quantitative”, but the mistakes about “easing” have proven far more problematic. There wasn’t anything new or unusual in his [...]

What Current Interest Rates Really Mean

By |2016-06-23T18:55:15-04:00June 23rd, 2016|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

On June 14, the 10-year German bund yield traded briefly below zero for the first time. It was an inauspicious record but one that defines the contradictions at the center of all this economic and monetary controversy. On the one hand, that is what central banks tell us they are after especially with QE, to reduce interest rates even at [...]

Uncomfortably Familiar

By |2016-06-16T18:10:12-04:00June 16th, 2016|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

This is all starting to look very familiar and predictably so: Especially this: It is utterly extraordinary that the June 2023 eurodollar futures contract closed trading at 98.00, much less than on February 11 and a collapse of more than 150 bps in anticipated 3M LIBOR seven years in the future just since last July. It is, again, entirely anticipated given the [...]

Again We Find US Monetary Policy Written In Chinese, Cast In Hong Kong, Tokyo, and London

By |2016-06-16T16:32:28-04:00June 16th, 2016|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

The Treasury International Capital (TIC) update for April showed a very large net decline in foreign (registered) holdings of US securities. The total net drop was $68.7 billion, the largest in one month since the severe “dollar warning” in June 2013. Though we have become accustomed to these kinds of results, the biggest factor in April 2016 was on the [...]

Illiquidity, Safe Havens, and the Search For The Trigger

By |2016-06-13T19:10:59-04:00June 13th, 2016|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

If there seems to be more safe haven demand of late, the increasing odds of British exit from the EU is being blamed. According to Yahoo!Finance, Goldman Sachs sees “kinks” in the option structure, an agglomeration of hedging demand that points to maturities around the UK referendum. The absence of any heavy hedging this week suggests that markets have no [...]

Warning Of A Warning; Crossing February 11

By |2016-06-09T19:06:08-04:00June 9th, 2016|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Eurodollar futures prices rose again today, the seventh consecutive increase in most maturities. Six of those days were relatively small moves, the biggest jump last Friday with the release of the payroll report. For the benchmark June 2018 contract, the price is heading back up to the upper limit of the post-liquidation cycling. Trading has been confined to a very [...]

TIC Update As Usual Offers Confirmation And Maybe A Warning

By |2016-05-20T16:05:32-04:00May 20th, 2016|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets, Stocks|

The Treasury Department’s updated official custody figures show us nothing unexpected. As usual, the TIC numbers are useful more so in corroboration of what contemporary analysis had already described. In the case of March 2016, we find just the sort of apparent reduction in “dollar” pressure that matches observation of general global conditions after February. Total net “flow” was +$64.7 [...]

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