Category Archives: Monetary Policy

Reflexivity And Why The Fed Must Sell The Long End

The yield curve is flattening like a pancake.   Tightening cycles tend to do that. Furthermore, the effective float of 10-year and longer U.S. notes and bonds is relatively small and greatly distorts the bond market signal.   We have written … Continue reading

Posted in Bonds, Economics, Monetary Policy, Uncategorized | Tagged , , | 20 Comments

Strange Currencies and Barter 101

Once upon a time, currencies had intrinsic value.  But now the dollar slouches towards Bethlehem  Wampum. Ever wonder where the term “buck” comes from? As in “Ray Nichols, you owe me 100 bucks for our bet the Golden State Warriors would … Continue reading

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The Fed’s Overnight Reverse Repurchase Agreements

Interesting piece on Barry Ritholz’  Big Picture blog yesterday,  Implementing Monetary Policy: Perspective from the Open Market Trading Desk.    An excellent follow-up to our last week’s post, Orwellian Monetary Policy. Recall we noted the structural change in monetary policy and … Continue reading

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Orwellian Monetary Policy

“Tightening is Easing” Since U.S. monetary policy began tightening in December 2015, the Fed has added liquidity to the financial system through interest payments to banks on excess reserves and has reduced its surplus to the Treasury adding to the … Continue reading

Posted in Budget Deficit, Interest Rates, Monetary Policy, Uncategorized | Tagged | 18 Comments

Fed Ownership of Yield Curve and Balance Sheet Reduction

Here you have it, folks, a one stop chart. The chart below shows the total outstandings of Treasury bonds and notes,  the Fed ownership of the total maturities and percentage of outstandings in each year of maturity (note, the data … Continue reading

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The Chart That Floats Overvaluation

We hear a lot these days about how all assets are overvalued.  Very and don’t disagree. Lots of gurus and big money managers engaging in market crash talking.   Doubt it, but could be wrong.  Too much liquidity and cash in … Continue reading

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The Broken Bond Market

The Fed tightens on Wednesday and bonds rally.  What the hay? GaveKal, Jeff Gundlach,  and Jim Bianco nailed it in that every spec and their mother are/were short 10-year Treasuries. Source: Quandl (see here for interactive chart) But this is … Continue reading

Posted in Bonds, Monetary Policy, Sovereign Debt, Sovereign Risk | Tagged , , , , , | 35 Comments

COTD: The Monetary Transmission Mechanism

On  FOMC eve we thought you’d find the following chart from the IMF’s Global Financial Stability Report useful. The traditional discussion of monetary policy transmission emphasizes how changes in interest rates affect investment and consumption decisions.  These channels operate through … Continue reading

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U.S. Banks Primed And Ready To Roll – Expect the Unexpected

We’ve been busy crunching numbers on the consolidated balance sheet of U.S.-chartered depository institutions and comparing their mix of assets relative to their pre-crisis levels. The large U.S. banks begin reporting earnings on Friday. The Coming Credit Led Expansion Our … Continue reading

Posted in Economics, Monetary Policy, Uncategorized | Tagged , , , | 2 Comments

Mr. “King Dollar” Takes The CEA

Congrats to Larry Kudlow,  a good guy (though a supply side ideologue),  as reports pour in that President-elect Trump will appoint him to head up the Council of Economic Advisors (CEA). He has always advocated a strong dollar, or “King … Continue reading

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