December 21, 2009 was my last day as a visiting advisor at the Federal Reserve Board in Washington DC. I had spent most all of 2009 there, and I came away learning two very important lessons. First, I realized that the greatest risk takers in markets did not reside inside hedge funds or money managers, […]

Janet's press conference yesterday was nothing short of spectacular! She delivered a hawkish message relative to market expectations, but managed to push spoos up over 2% and HYG up 2 points. Her ability to generate a DXY rally, a UST sell off and a risk asset rip fest was truly a work of central banking […]

The RUB collapse earlier this week opened up many old wounds. Those who were on trading floors in the Fall of 1998 can easily recall the chaos which ensued post the Russia default. GKOs were in free fall, Russia 28s traded down to single digit dollar prices and the RUB gapped from 6 to 20. […]

Spotting a bubble is never easy. And determining the root causes of a bubble is also never easy. It usually takes years of retrofitting to understand all of the dynamics behind bubble creation and bubble popping. Even today the debates rage on the sources of our US housing bubble. Was it the Fed keeping rates […]

The US employment data were VERY strong. QE has worked its magic and the FOMC will be looking to remove accommodation sooner than the market thinks. As we have discussed before, the communications surrounding this accommodation removal will be complicated, and policy mishaps will become more frequent. Volatility is set to rise, and more importantly […]

There was something quite sad about watching Mario speak today. The aggressiveness of his words just 2 weeks ago failed echo through today's discourse. And when he was asked about the inconsistency between his purported desire to "move without delay" and his the wait-and-see approach to policy presented today, his response was "that's a good […]

Here is my one paragraph, quick and dirty, abridged version of Mario's speech: "we cannot be complacent - we have to be very watchful that low inflation does not start percolating through the economy.....if inflation expectations fall, the real interest rate rises...in other words, any de-anchoring of expectations would cause an effective monetary tightening - […]

Before I kick off today's note, I want to remind everyone who has not already done so to open the link below and fill out the requested information. https://www.jefferies.com/zervos/register.aspx This will be the last commentary sent via our old Bloomberg based delivery system. Only those folks who have signed up on the link, or had […]

It was an epic Friday in Japan. Haruhiko (aka Harry) Kuroda gave us something as rare as 30 year old Hibiki - a positive monetary policy surprise. In BoJ history, one can only find a handful of instances where policy accommodation surprised to the upside. But that said, we should have all been holding out […]

By now a more hawkish FOMC statement has settled into market prices - spoos are down, the USD is stronger and the curve is flatter (with CT30 actually rallying). However, by recent standards, these moves have been relatively minor. The market took an upbeat labor market assessment, and a sidelining of recent deflationary pressures, without […]