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March 2010

Boeing’s 787 Faces Critical Wing Test Today

**Update 3/29: Boeing calls initial results of new wing stress test ‘positive’** Before any new aircraft design is put into service it’s required to pass a wing stress test, which stretches the wing to 150% of the most extreme stresses it will face while in service.  Reasonable enough.  However, what I didn’t realize is that […]

In The World of Rates, What Goes Down Must Come up; Expect Higher 10Y and Mortgage Rates

Next week the Fed will cease purchasing agency MBS, to an industry outsider this innocuous sounding fact may not garner much attention, but the reality is the implications are likely very significant, and are already making themselves apparent in the market.  Former Fed Chairman Alan Greenspan recently referred to last week’s jump in U.S. interest […]

First Portugal, Then New Home Sales, Next…

What a day, I wake up to the news that Fitch has downgraded Portugal, leading to a strong sell-off in Euro–reaching a ten month low against the dollar. This news was not tremendously surprising, and I expect the situation in Europe will get far worse before getting better, especially if Greece doesn’t find a funding […]

Economists Warn Fed Could Hike Discount Rate Before Next Meeting

Economists and investors alike are speculating that the Fed could announce a second hike to the discount rate, after increasing its spread over the fed funds target rate to 50bps–compared to its historical level of 100bps.    Some investors, despite Fed comments to the contrary, perceived the move as prelude to more significant tightening, be […]

Could Higher Industrial Production Result in Less Hiring?

February’s surprise 0.1% increment in industrial production came despite severe winter weather during the month that was expected to hamper production.  Amongst the index’s biggest gainers were computers and information processing equipment, which each rose roughly 1%.  As Bloomberg put it these increments ‘signal the pickup in U.S. business investment is being sustained’.  However, could […]

China’s Tightening Tool Box…

The wheels of tightening may be gaining momentum in China, after February’s higher than anticipated inflation release.  High inflation leading to negative real deposit rates may entice investors to withdraw deposits and invest in more speculative assets, potentially spurring what is arguably already a bubble in the country’s housing sector.  I believe that China has […]

Chinese RMB Appreciation Always Seems Six Months Away (But It’s Coming)…

Since the start of this year I have been a proponent of the belief that China will once again begin to gradually appreciate their currency as exports recover, and inflation begins to creep back into the Chinese economy.  As the chart below illustrates,  investors in the CNY NDF market appear to share this view.  But, […]