The part I found most interesting is where the FOMC thought it was important for us have the Fisher equation spelled out in detail – “With short-term nominal interest rates constrained by the zero bound, a decline in short-term inflation expectations increases short term real interest rates (that is, the difference between nominal interest rates […]
For the bulk of the FOMC voting members, the act of easing monetary policy from current levels involves outright buying of longer dated Treasury securities with the explicit intent to lower longer term bond yields. As Vice Chairman Dudley stated in his seminal October 1st speech: “…purchases of long-duration assets pull down the level of […]
Welcome to the world of the Bernanke put. In the end the data ex government/census noise looks decent with private payrolls on the same trend at 80k/mth or so. But headline seems to be the focus for govvies which now have to anticipate the Fed buying 6 yards a day post November. They might as […]
There are many news stories floating around on the Fed’s near certain restart of a Treasury LSAP program in November. You have some commentators suggesting that tea party candidates want to reign in Fed intervention in the Treasury market. The idea is that the Fed is creating a Treasury bubble and making it easier for […]
Private payrolls miss by almost 50k and the spoo is flat on the day at 5 month highs!!! Anyone that does not believe in the Bernanke Put needs to rethink the situation. The only issue that confounds the full throttle reflation trade is implementation. At present, the current FOMC believes that buying long dated Treasuries […]
A quick look at the speeds shows that most cohorts came in slower than expected. Add to that a crushing of vol (swaptions are down 7 normals on 10y tails today) and mortgages are ripping into the close. The big Fed holdings in FNM 2009 4.5s came in at 22 (we were looking for 23). […]
It’s sooo nice to back in front of the screens after 2 plus weeks on the road. Today I want to discuss the BoJ decision from last night which is incredibly important for all securities markets. First, the link to the statement is here – http://www.boj.or.jp/en/type/release/adhoc10/k101005.pdf. Second, the rate cut is irrelevant. And third, the […]
Bill Dudley’s speech on Friday all but announced the LSAP 2 program. “We have tools that can provide additional stimulus at costs that do not appear to be prohibitive. Thus, I conclude that further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we […]
As I arrived at my hotel in Madrid late last night, there was a banner hanging above the entry. It said “The hotel staff will be on strike tomorrow for the first time in over 100 years. Not even during the Spanish Civil War did the hotel staff miss a day at work”. It was […]
I have a couple more days in Europe before I head to the West coast. I have had some amazing discussions with clients on Europe, the US and China. The diversity of views is staggering and it’s clear that those in the “optimistic” camp have been very frustrated by the US and German bond markets […]