If it is a day ending in “y” you can be sure there is somewhere in the financial press a story or “news report” of the looming bond selloff – even if it is due to some future event or made up phenomenon. Today’s is another in the series this time using a dramatized setup for technical analysis. A three [...]
While I commend the mainstream media for refraining the past few months from their orthodox tendencies to shout BOND ROUT!!! every time long Treasury yields rise for more than a few days at a time, that doesn’t mean the total absence of the ridiculous. With the long end once again trending lower in nominal yields, the curve has utterly collapsed [...]
The good news is that the economy just printed its second consecutive quarter of 3% growth, a feat not accomplished since Q2 and Q3 2014. The bad news is that the growth spurt in 2014 was better, quantitatively and qualitatively. Those two quarters produced gains of 4.6% and 5.2% (annualized) in GDP, much better than the most recent 3.1% and [...]
Back in September, the FOMC announced that it was in October going to start normalizing its balance sheet. The policy statement issued that day included all the usual qualifications of “solid”, “strengthen”, and “picked up.” The near-term risks to the economy, it was written, “appear roughly balanced.” Not all was well with the economic situation, however, as the central bank’s [...]
Back in June, China’s federal bond yield curve inverted. Ahead of mid-year bank checks, short-term govvies sold off as longer bonds continued to be bought. It was for some a rotation, for others a reflection of money rates threatening to spiral out of control. On June 19, for example, the 6-month federal security yielded 3.87% compared to a yield of [...]
Why don’t economists understand bonds? The long answer involves several detours into parts of Economics that have nothing to do with interest rates or even money. More so these places are dominated by discussions of stochastic calculus and partial differential equations. Thus, the short answer is: Affine models of the term structure of interest rates are a popular tool for [...]
The risk budget this month shifts slightly as we add cash to the portfolio. For the moderate risk investor the allocation to bonds is unchanged at 50%, risk assets are reduced to 45% and cash is raised to 5%. The changes this month are modest and may prove temporary but I felt a move to reduce risk was prudent given [...]
When I wrote the update two weeks ago I said that we might be nearing the point of maximum optimism. Apparently, there is another gear for optimism in this market as stocks have just continued to slowly but surely reach for the sky. Which is fine I suppose since we own the devils (although not much in the way of [...]
At this point in the longer term process of unwinding the Fed’s prior emergency activities, the yield curve was supposed to flatten. That was the plan all along. If monetary policy was successful, or had even run into just dumb luck somewhere in the last ten years, here where policymakers declare the economy to be short rates would be moving [...]
The economic reports of the last two weeks were generally of a more positive tone. The majority of reports were better than expected although it must be noted that many of those reports were of the sentiment variety, reflecting optimism about the future that may or may not prove warranted. Markets have certainly responded to the dreams of tax reform [...]
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