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’The ECB has a communications problem
The Fed isn’t the only central bank grappling with flaws in its communications policy amid problems with its traditional policy transmission mechanisms.
Everyone is well aware of the ECB’s non-traditional measures to this point:
Barclays visits the securitisation BISTRO
FT Alphaville has outlined how securitisation is getting back to its roots lately, allowing banks to reduce capital holdings at a time when fresh capital is hard to come by.
Basically, they buy protection on slices of their own assets,
Back to the BISTRO for today’s securitisations — Part 1
The airwaves are once again aflutter with tales of the “shadow banking” sector, owing to the chief of the relatively new Financial Stability Board.
As the FT’s Tracy Alloway also recently reported, the sector was already back to its pre-crisis size at the end of 2010 at a healthy $60,000bn of assets.
FOMC statement, 13 December 2011
Go back to watching Mario. See you in 2012.
– FOMC statement, 13 December 2011
Not quite, of course, but as expected, there’s nothing to see in the December FOMC statement. Rates remain the same and Twist continues.
The central bank Treasuries dump is not about Twist
“Are foreign central banks rejecting Operation Twist?”
That’s the provocative question asked in a note by RBS strategists this morning — and while the answer is “no”, the rationale for it is both intriguing and touches on some interesting developments happening around the globe.
Bernanke sets the stage for…
… some sort of easing, again.
He had already set it at Jackson Hole and the August 9 FOMC, and mostly confirmed by the minutes of that meeting.
He didn’t add much in today’s speech: no new details on potential upcoming policy changes such as Operation Twist or anything else you may have heard via Fedwire.
How to serve front-end yields up with a Twist
The chatter on Friday in response to the stomach-punching payrolls is that we’re headed for Operation Twist Part Deux — number 13 on our list of Fantasy Fed options — though not outright QE3 in the form of large scale asset purchases.
The qualifier in Yellen’s speech
Most of Janet Yellen’s speech today about commodity prices and the economic outlook was about what you would expect, and we covered many of the same issues in our long discussion last week about inflation expectations.
A large dislocation in the repo markets
We all remember the Fed’s sort-of promise to abide by self-imposed System Open Market Account (SOMA) restrictions — supposedly, so as not to completely corner the US Treasury market.
Well, according to Bank of America Merrill Lynch’s Shyam S.
Don’t wait for Fed rate hikes — Morgan Stanley
FOMC minutes are out Tuesday afternoon and we’ll be at the ready for signals of an exit strategy for the Fed.
In a short note out in advance of their release, Morgan Stanley adds its name to those warning a “tightening moment”
The Fed’s secret liquidity
Back in August 2010 FT Alphaville quoted BarCap’s Joseph Abate on the notion that wrapping up the ‘Supplementary Financing Program’ (SFP), which sells bills on behalf of the Fed, could be a useful stealth easing/liquidity measure.
An exit strategy for the Fed
We have all the tools we need to achieve a smooth and effective exit at the appropriate time.
Ben Bernanke, Semiannual Monetary Policy Report to the Congress, March 1, 2011
Friday’s decent jobs report and accompanying hawkish cacophony have encouraged further talk about when the Fed will raise rates and revert to a place called normalcy.
Further further reading
For the commute home, or while wondering if expedia also does tax holidays,
- Do not gloss over munis’ frailties.
- Gulf SWFs (unsurprisingly) are revisiting their investment strategies.
- A tax holiday for MNCs is a very bad idea.
UpTIC in China’s treasury holdings? Sort of
The US treasury department has published the preliminary results of its annual revisions to foreign holdings of US securities.
In chart form, with an explainer to follow:
The US treasury department publishes monthly estimates of these numbers based on interviews with US financial institutions.
The Fed in 2011
We noted a few weeks ago that the futures market was probably getting ahead of itself in predicting that the Fed would begin tightening policy sometime after August of this year.
This passage from the minutes of the last FOMC meeting…
Thomas Hoenig: Why I dissented
Thomas Hoenig, Kansas City Fed President — who is retiring next year — obviously feels a bit hard done by when it comes to how his role as an FOMC dissenter was portrayed by the press.
The full extract of his Wednesday speech to the Central Exchange,
No-drama swap lines
A big global dollar shortage? Not quite — don’t panic.
Some commentary from Tullet Prebon’s G7 Economics team on the Fed’s decision Tuesday to extend its swap lines to various foreign central banks:
The QE2 sails right over the 35 per cent rule
How we’ve waited. The Federal Reserve Open Market Committee’s has unveiled $600bn — $900bn counting MBS re-investments — of Treasury purchases to combat weak inflation.
Here’s the key bit from the FOMC statement:
The Fed is the biggest seller of volatility
Correlation has purportedly come down a bit since its peak levels achieved earlier this summer.
Nevertheless, it is still running way above historic norms.
Meanwhile, all sorts of factors — ranging from index funds to volatility — have been blamed for the rising trend.
The inflationista returns
Is someone turning queasy on QE2?
Here’s a Bloomberg chart showing the (sizeable) spread between the five-year forward US break-even inflation rate and five-year Tips yields:
As we said, sizeable — and as we’ve noted before,
QE wars, Japan edition
You may have heard that China has launched a new mission to the Moon.
But what no one seems to have told the market — or a Federal Reserve pondering further quantitative easing — is that Japan has quietly staged a landing on Planet Zirp in the meantime.
NY Fed: more, please
Those Fed presidents really love giving speeches, don’t they?
After this week’s statements by four other regional presidents, who differed on both the economic outlook and their preferred policy recommendations,
So QE-asy it hurts
Gold glittering past a nominal record high:
The dollar sinking to a five-month low against the yen:
And even the euro is getting used to life at $1.35.
Clearly, Tuesday’s insider-y WSJ article on the Fed and QE2 has made waves.
An intriguing pick-up in Treasury settlement fails
Some curious developments in the US Treasury market to report.
First, there’s been a relatively strong burst of settlement failures in the US Treasury repo market in the last week.
According to data compiled the New York Fed,
Staying on target
The FOMC meets on Tuesday, and a discussion has broken out among the commentariat over the potential efficacy — and political viability — of the Fed’s setting a higher inflation target.
Tyler Cowen argues an inflation target of 3 per cent would effectively boost spending and reduce the real value of debt,
More mystery in quarterly repo patterns
Readers might remember a WSJ story earlier this year which highlighted intriguing end-of-quarter peculiarities in New York Fed data on primary dealers in repo markets.
The WSJ’s point was that the irregularities could have been the result of banks trying to mask their risk levels in the past five quarters by temporarily lowering their debt,
Keep your credit, buy our stuff
We’ve written before about the difficulty of knowing whether the decline in small business lending is a problem of supply or demand.
The answer matters not just to the health of small businesses, but for knowing whether the Fed’s easing measures have been successful in circulating credit throughout the economy.
The Fed, and what to do about MBS
Not that the Fed has ever been a model of clarity and decisiveness, but the announcement in August that it would re-invest proceeds from its MBS holdings into long-dated Treasuries left open a few questions: