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Fed

Fed Could Lower Spread for Currency Swaps to Increase European Liquidity

Rumors have been spreading across trading floors that the Fed may lower the penalty for using its dollar liquidity swap line to reduce stress in the interbank market.   As I mentioned in a previous note, a 100bp ‘penalty’ over the overnight indexed swap (OIS) rate for the Fed’s dollar liquidity swap line is preventing the […]

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 […]

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 […]

What To Look For This Week

This week I am going to keep a close eye on several housing reports, which include January’s new (Wed) and existing (Fri) home sales along with December’s Case Shiller HPI (Tue)–December is the first month after what would have been the expiration of the first time home buyer tax credit.  December’s home prices likely came […]

Bernanke Comments

It looks like over the short-term the Fed will be using interest on excess reserves as its primary monetary policy tool to aid in its removal of excess liquidity from the market. This is the interest rates paid to banks on excess reserves held at the Fed.  These comments continue to indicate accommodative monetary policy […]

Fed Leaves Rates Unchanged, But Begins to Scrap Treasury Purchase Program

As expected the Fed announced no changes to the target range for the federal funds rate, which currently stands at between 0% and 0.25%. The market was trading up  prior to the announcement on what was generally expected to be a more constructive economic outlook from the Fed.  In fact the Fed did seem more […]

A Graphical Look at October’s Senior Loan Officer Survey:

Back in January I did a piece discussing the predictive power of the Senior Loan Officer Survey, and found that there was some significance to the data. For the survey banks’ senior loan officers are asked to answer multiple questions based on their lending standards and demand for commercial/residential loans as well as consumer loans. […]

The Age of Despondency…

One could argue we have moved from an age of exuberance to an age of despondency. Not long ago our major concern was sky rocketing commodity prices, and its effect on global inflation; enter the credit crisis. We are currently witnessing an unprecedented global sell-off with no regards to asset classes or quality, or as […]

My Thoughts on the Next 24 Hours…

These are very interesting times… At this point in time, after passing up some deals which could have saved AIG, I wouldn’t be surprised if we saw at least part if not all of AIG being bought at bargain basement prices by one of its major competitors. I think it will be tough for them […]