Post Tagged with: "Federal Reserve"

The wisdom of crowds and government bond markets

The wisdom of crowds and government bond markets






When you look at how markets are positioned, it’s clear that a lot of people see continued low growth for years to come – a veritable Japanification of the US economy. I hope this is one of those times that markets are wrong. But I am not willing to bet on the hope, just the opposite.

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The oil price cliff dive will end the prospect of double-barrelled tightening

The oil price cliff dive will end the prospect of double-barrelled tightening






A pause is being considered at the Fed, even by hawkish FOMC members. The oil price crash now gathering steam makes this pause more likely. Maybe Bullard’s infamous low dot on the Fed’s Summary of Economic Projections is the right way to look at Fed policy.






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Is the new rout in oil getting worrying?

Is the new rout in oil getting worrying?






Earlier this morning, the New York Mercantile Exchange was quoting delivery for light sweet crude in July at $43.30. That’s a far cry from the $55 average that analysts had expected for 2017 as recently as last month. And all indications are that this price deflation is not transitory, but lasting. The selloff in oil brings year-to-date losses to some […]

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The Fed will continue to tighten despite inflation below target

The Fed will continue to tighten despite inflation below target






New York Fed President William Dudley has reiterating Fed Chair Janet Yellen’s determination to push forward with interest rate hikes despite inflation below 2%. The Fed will continue to have this stance unless and until economic data weakens significantly.






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The Fed’s financial stability concerns, auto subprime edition

The Fed’s financial stability concerns, auto subprime edition






Below are some data points from recent credit statistics and analyses, showing trends in the auto credit sector.






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The Fed’s financial stability concerns before its June hike

The Fed’s financial stability concerns before its June hike






Hiking rates now after a monster commercial real estate cycle has already developed is akin to closing the stable doors after the horse has already bolted. But this may be a concern of the Fed. Let’s see what the Spring 2017 OCC Risk Assessment says when it comes out.






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What are credit markets signalling about the US economy?

What are credit markets signalling about the US economy?






The US economy has been very resilient during this post-crisis business cycle, as we are now into our ninth year of economic expansion. Soon we could hit a record for the length of an expansion. Yet, with that backdrop, 10-year Treasury yields were at 2.13% this morning – even as the Fed signals more hikes to come in 2017 as well as reverse QE. I think the bond market is signalling continued low growth and low inflation. Some thoughts below






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On the Fed’s pause due to dual-barrelled monetary tightening

On the Fed’s pause due to dual-barrelled monetary tightening






Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered waters of dual-barrelled tightening, with the attendant risks that entails. Some comments below






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Markets actually aren’t freaking out about Trump

Markets actually aren’t freaking out about Trump






We are seeing decent selling in today’s US equity markets, with the VIX up some 25%. And most people are pointing to the Trump scandals. But this is only one day. What is happening with Trump – while negative – will not change the arc of the US economy and markets.






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Jobs data: The US will hike in June amid high structural unemployment

Jobs data: The US will hike in June amid high structural unemployment






Remember the debates about structural unemployment back during the beginning of this recovery. The question was whether policymakers would write off a whole cadre of workers as ‘unemployable’ and formulate policy as if they weren’t important. After the April jobs report, I think we have our answer.






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What the tension in the oil market means

What the tension in the oil market means






As we await the US jobs data, it bears remembering that oil is a big wildcard both on in terms of consumption and investment. Right now, oil is plunging, down as much as $14 a barrel for the Brent variant and $17 a barrel for WTI since mid-April. The question is whether the rout continues.






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The Fed will continue to look through weak Q1 data






With demand for long-dated safe assets high, the yield curve will remain under flattening pressure. And that, combined with higher short-term rates will be negative for bank net interest margins and earnings.






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