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’The not-so-fearless Fed?
The narrative around the Fed’s announcement on Wednesday is that it went ahead with a $400bn ‘twist’, towards the larger end of what was expected — despite some pretty heavy pressure from the Republicans a couple of days earlier.
Breaking on FedWire…
This is getting ridiculous.
At this rate there won’t be any point logging on to read the FOMC minutes on Wednesday evening. FedWire, the unofficial/official news service of the Federal Reserve, has done such a comprehensive briefing the market on what to expect that there can’t possibly be any surprises…
The pre-conditions for a double-dip
Fed tightening, apparently.
(Not that there are a lot of examples to go on.)
This is from Spyros Andreopoulos at Morgan Stanley. He sifts through all the slowdowns — defined as two successive quarters of growth not exceeding 1 per cent — recorded since 1950.
Monetarists and IOER
We’ve just explained RBC Capital Markets’ thinking as to why cutting IOER might be worse than ineffective. That it could instead encourage systemic risk by increasing the incentive to fail to deliver securities for settlement,
Why cutting IOER could be suicidal
By Jove! Someone’s finally got it.
Cutting interest on excess reserve is a hugely risky option for the Fed, and could do more damage than good (leading even to major systemic issues). We’ve said as much,
Goldman says let’s Twist again
Found.
Someone who thinks a change in the composition of the Federal Reserve’s balance sheet (a new Operation Twist) would be a good idea.
Guess who? (Obviously it’s not Bill Gross).
Give up?
OK then,
On the difference between virtuous and vicious circles
There’s something to reading Ben Bernanke’s speeches from a passive communication point of view. It’s not so much what he says, but what he doesn’t say. Or rather what he infers by saying something else.
The three Fed stooges (and Mr Gross)
The Federal’s reverse unofficial/official news service – FedWire, or Jon Hilsenrath of the Wall Street Journal — has spoken.
The FOMC has a menu of three options at its two-day meeting beginning on September 20,
Some extremely special Treasuries
Here’s an interesting datapoint Fred Sommers, of the Basis Point Group, on Monday.
As we’ve written before, Sommers is among a number of back office specialists who have become increasingly concerned about a growing lack of discipline in trade settlements since 2008.
Jedi Kocherlakota on the ways of the FOMC force
As FT Alphaville noted before, the role of the FOMC is about more than just conducting monetary operations. It’s also about moulding investor opinion and expectation.
So, when traditional monetary tools of the Federal Reserve dry up,
The overnight Black Swan
It used to be that lending was done on unsecured term durations, all the time.
Then we had the credit crunch, and unsecured term lending died.
Then everyone started lending on a collateralised basis.
Goldman’s Q(E3)&A
There was no press conference with Ben Bernanke after the August 9 FOMC statement or following his Jackson Hole speech — and there won’t be another until after Congress pays attention and starts pulling its weight around here November 2.
The Fed’s oil easing
This post is going to address two fundamental points:
1) Why it might make sense for the Fed (or a respective government agent) to intervene in commodities.
2) Whether the Fed has indirectly already intervened and does this explain the mysterious WTI-Brent disconnect?
While we appreciate the above might be considered controversial,
El-Erian: Interpreting Bernanke’s Jackson Hole speech
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, responds to the Federal Reserve chairman’s speech at the Jackson Hole conference.
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Chairman Bernanke’s Jackson Hole speech,
Jedi Economics
If Paul Krugman (and others) are right, classical monetary policy goes out the window in a world where nominal interest rates are zero bound. All the usual monetary tools at the disposal of central bankers just don’t work.
Fantasy Fed options
While the world seems divided on whether Friday’s Jackson Hole meeting will result in the announcement of a fresh round of quantitative easing or not — we thought we’d run with the premise that QE in its conventional form is now redundant or impossible.
The life of Bryan, or what did monetary policy ever do for us?
To understand why Rick Perry this week picked a fight with Ben Bernanke and why media pariah Ron Paul continues to attract a cult following, it helps to know what happened on the evening of June 20, 1790 at a New York dinner party.
The ‘high-powered money’ problem
Fed dissenter Richard Fisher has taken to speaking in the language of Ben Bernanke’s own Great Depression paper “Nonmonetary effects of the financial crisis in the propogation of the Great Depression”,
The Fed dissenters
So now we know why FOMC members Fischer and Plosser voted against Bernanke’s “on hold till ’13″ policy.
From Bloomberg:
Philadelphia Fed President Charles Plosser said in an interview yesterday that taking action after stocks tumbled “signaled that we are in the business of supporting the stock market.” Richard Fisher,
On Rick Perry being a loony
Texas Governor Rick Perry’s considered perspective on Fed chairman Ben Bernanke at a time of national economic crisis:
If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa,
30-year old WLTM $$$ ISO LTR
Heartbreaking. The FT’s Telis Demos points us in the direction of some barmy post-auction action in 30-year US Treasuries:
That’s the largest intra-day basis points move since 1987.
There was an abysmal auction of the long bonds earlier on Thursday.
When a government bond becomes a Giffen good
So, Swiss short-term market rates are now fully negative:
But it’s not just short-term rates. As of Thursday anyone holding two-year or three-year Swiss bonds is apparently demanding that the price exceeds the coupon-included return in order to be tempted to sell.
Banks: QE3 is coming
Hope springs eternal in the investment banks.
Tuesday’s FOMC statement drew attention for its commitment to 0 – 0.25 per cent rates until at least mid-2013. This led to the less than sudden realisation that holding (some) stocks was more attractive than nursing the corpse of a 2-year bill.
FOMC statement – 9 August 2011
It’s here! We’re saved!
Wait a minute….
The full FOMC statement for August 9 is pasted below for your reading pleasure.
It’s more QE2.0 than QE3.
There are two key changes.
First, the Fed has given a semi-specific date for the continuation of the federal funds rate at “exceptionally low levels”.
Who has to act on Treasuries?
Leaving aside the volatility and growth fears, who is really compelled to sell Treasuries as a result of the S&P downgrade?
The answer, when it has all played out, might go some way to explaining just how powerful the ratings agencies are right now.
Friday: five stories, five questions
A long, strange, volatile day. Charted:
Stocks suffered large swings, with financials taking some of the biggest hits. Yields on 10-year US Treasuries were up by their largest amount this year — ending up around 2.57 per cent.
The US’s Greece-y new debt dynamics
Some debt doom and gloom from Independent Strategy’s Bob McKee…
… a man who, quite literally, wrote the book on sovereign debt crises.
He notes that the debt deal reached earlier this week does little to address the most pressing of the US’s fiscal issues.
SOMA takes duration risk on your behalf
Did you know that the Fed’s System Open Market Account (SOMA) — the portfolio in which the Fed stashes all the lovely Treasuries it picks up as a result of its quantitative easing asset purchases — has seen its average duration rise from between two and three years to over 4½ years at the end of June this year?
Its holdings meanwhile have risen by an additional $1,600bn worth of assets.
Libor, repressed
From the annals of financial repression, we bring you Libor rates.
It’s a torrid tale of QE2, dollar funding and liquidity — and it’s one we thought we’d mention, given that the Federal Reserve’s second bout of quantitative easing has just come to an end.
And so farewell, QE2
The last QE2 open market operation: $12.47bn of Treasuries tendered by primary dealers, $4.91bn accepted by the Fed, $4.4bn of which was yesterday’s new seven-year bond.
As highlighted in FT Alphaville’s tombstone (data via Reuters):