Inflation doves can look no further than near record low yields on 2-year Treasuries to squelch inflation hawks ‘premature’ concerns. The 2-year yield is reflecting the fact that the recovery will remain lukewarm, with downside risks outweighing the contrary, essentially opening up hunting season on Fed hawks—already in small supply. While hawk hunting may be […]
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Fed News
Defying most investors’ expectations, LIBOR’s climb has continued unabated, despite the reopening of the Fed’s Reciprocal Currency Swap lines. According to the ECB’s records on May 11th seven bidders tapped USD9.2bn of the swaps at a rate of 1.22%, or nearly 100bps above the OIS funding rate. Ray Stone of Stone & McCarthy Research Associates, […]
As expected mortgage rates have begun to climb. On March 31st, as planned the Fed terminated its mortgage backed securities (MBS) purchase program after buying $1.25trn of the instruments–keeping mortgage rates artificially low. According to the Mortgage Bankers Association (MBA), the average rate for a 30Y mortgage already climbed to 5.31% the week ending 4/2, compared to […]
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 […]
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 […]
Chairman Bernanke recently indicated that the Fed was considering an increase in the discount rate, which tends to mean it is going to happen and soon. It happened, the Fed this evening announced an increase in the discount rate to 0.75% from 0.50%, moving it closer to its pre-crisis spread to the Fed Funds Rate […]
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 […]
ABC News (Australia)is reporting that, “A Reserve Bank official says the head of the European Central Bank, Jean-Claude Trichet, is leaving a Sydney meeting of central bankers early to attend an ECB council meeting.” I expect this means investors could anticipate some market moving news related to troubled EU nations over the next few days.
According to CNBC, James Bullard,President Federal Reserve Bank of St. Louis, indicated in an interview today that *he does not believe the Fed will begin hiking interest rates, until after they start selling off some assets. He anticipates that the Fed could begin selling assets during the second half of this year. Bullard had this […]
As anticipated the FOMC reaffirmed that it “will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions…are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” But, a hawkish sign came in the form of a dissenting […]