So I didn’t get much time to catch up on markets after I sent out yesterday’s commentary. I was bombarded by clients who wanted to dig deeper into this idea that the Fed move to reinvest the proceeds of mbs pay downs was less about a policy shift and more about a balance sheet protection […]
I arrived back stateside late last night so I am just gathering my thoughts. I certainly did not expect a blatant shift to balance sheet targeting by the FOMC and I am trying to look through to motivations. Yes the data have been poor, but all indications from speeches etc. were that we would need […]
Jim Bullard has actually thrown a great paper out there for all of us to think about (http://research.stlouisfed.org/econ/bullard/pdf/SevenFacesFinalJul28.pdf). The simple premise is that using “extended period” style language creates unintended negative consequences for the economy. If your central bank runs around telling you rates are on hold forever, then it starts to reinforce deflationary expectations, […]
Yes I’m making a jocular to reference to Johan van der smut, aka Goldmember – but the real accident here has to do with GC1 chart I have attached. We have broken the 100 day MA and the 200 day is VERY close by. One of the central themes of the Depressionistas (a fringe outgrowth […]
I remember the days when non agency mortgage desks used to hedge their interest rate exposure. Then the crisis hit and instead of thinking about red packs they were busy deciding whether to discount cash flows at 8%, 15% or 25%. It was easy to understand why non agency guys had no use for interest […]
A catchy headline huh? Sorry to all the doomsayers, it’s not the crash you were hoping for! This crash will be in implied vols! Attached are 3 charts – 5y5y USD implied swaption vol, 1 mth EURUSD FX implied vol and the VIX. Two things are apparent from these charts – 1. vols are still […]
While the initial reaction to Ben’s testimony generated a few hick-ups, we are following a standard, albeit somewhat delayed, market response – stronger risk assets and lower expected short rates. Spoos are up about a percent and FFM1 are up 3bps since the testimony release at 2pm on the 21st. There have however been a […]
I remember when we all used to brace ourselves for HH testimony (aka the semiannual monetary policy report to congress). The wording was always cryptic and confusing – and everyone sat on the edge of their seat trying to figure out what the maestro was really saying. If the word “somewhat” was inserted in the […]
Before discussing today’s HH testimony, I wanted to follow up on yesterday’s commentary attacking the deflationista camp. I received mucho feedback on that piece – some agreed, but many didn’t like what they read and wanted more detail. Specifically, people asked for some numbers pre-1950. So here you go – these are the average annual […]
I thought I would look back over the last 60 years and attempt to measure how significant these hyped up deflation risks in the US economy really are. Deflation angst has surely been increasing recently – and it was also quite a prevalent worry back in the last recession when helicopter Ben was making waves. […]