I constantly read how things are more correlated than ever - risk on/risk off is the usual way commentators describe a typical trading day. I want to take a strong objection to this statement. I think things are about as uncorrelated as I can ever remember! Over the last month, risk free assets and risky […]

Yesterday’s “Stirring the Pot” commentary created what I could only describe as a boil over effect! Based on the comments I received yesterday, one thing I can say for sure is that there are a lot of angry folks out there who are not interested in seeing their 6% coupons taken away from them by […]

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 […]