Thursday’s 5-year US Treasury TIPS auction was something of a noteworthy one, according to Kit Juckes at Societe Generale. Click to enlarge…
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Don’t go to Australia (but do click to enlarge the charts):
Here follows a thoughtful commentary on the changes going on in gold market from BNY Mellon’s Neil Mellor, including the point that central bank purchases are in many ways helping to stabilise what might otherwise be a much more substantial slump.
Our emphasis throughout… Read more
Cheery chap, Tim Morgan, chief economist at money broker Tullett Prebon. Here’s a few charts to warm us all up on a cold February day…
Dario Perkins at Lombard Street Research has a great little note out on Tuesday arguing why it’s absolutely wrong to assume the current bond sell-off is in any shape or form a repeat of 1994.
As he notes (our emphasis): Read more
The following chart, we propose, has the potential to inspire a whole new way of looking at the gold and Treasury market:
From the ECB’s September update on monetary developments in the euro-area released on Thursday:
That’s euroland M3 – the broad money supply measure — coming in below expectations and dropping again to 2.7. Really brings to mind Draghi’s warning to the Bundestag that “In our assessment, the greater risk to price stability is currently falling prices in some euro area countries”, doesn’t it? Read more
Mervyn King gave a “personal assessment” of the inflation targeting regime over the past twenty years on Tuesday night. And seemed to suggest that it may be best to allow UK inflation to over-shoot the 2 per cent target given the current economic environment in order to minimise volatility. Read more
Capital Economics put out a cracker of a note on UK output this week. It’s taken us a while to get through it but we wanted to do it justice. Here’s the key extract:
‘Supply pessimists’ point to high inflation and growing employment as evidence of a small output gap. But inflation was pushed up by temporary factors and has eased recently, while domestically generated inflation has remained low.
We introduced our Rubiks QE analogy on Tuesday. This post is a continuation, in which we apply the analogy to the crisis so far.
Before we go on we should point out that the Rubik’s is a simplification, as are the concepts of “tomorrow money” and “today money”. There are and will always be areas that call for further explanation, but which we haven’t covered in this post. If they’ve been left out, it’s mostly due to post-length constraints. It’s not because we are wilfully ignoring them. Read more
This is reassuring (or not – we can’t decide). The Global fixed income strategy team at HSBC *believe* they’ve come up with a non-consensus view on the effects of QEternity:
Our non-consensus view is that QE3 will drive US Treasury yields to new lows Read more
“Mad. Mad. Mad. Bernanke’s gone totally MAD, I tell you!”
“What’s he thinking with QEternity? It’s so inflationary. AGHH!” Read more
“The Fed will destroy the world”
As top lines go it’s pretty decent… and when you follow up with a pic of a strategist in a bath you leave us no choice but to post (we tried to resist, we really did): Read more
For all the talk of heightened inflation expectations on the back of QE3, Morgan Stanley analysts remain unconvinced.
The truth, according to them, is that central bank action is having less than its desired effect. In fact, inflation expectations have remained well behaved if not subdued. Read more
The Office for National Statistics is out to get the Retail Price Index… or at least the part of responsible for the ‘formula effect gap’. But before we get to the sexy stuff — involving gilts and clauses and all — a quick statistical primer is called for.
The RPI began life as a compensation index, developed as an aid to protect ordinary British workers from price increases associated with WWI. It didn’t become the main domestic measure of inflation until much later. Read more
A couple of charts from Barclays economists showing the relative contribution of food to headline and core CPI:
The biggest change is in the very first paragraph. In June the Fed had written that the economy “has been expanding moderately”. Now economic activity has “decelerated somewhat over the first half of this year.” Read more
Presenting an economic journey in felt, looking at whether the system’s ails have more to do with an abundance of goods than a shortage of credit because of the system’s technological advances and efficiencies. Move ahead to slide 20 for a snapshot of where we *think* we are today.
1) The water source. Read more
Ah, the elusive liquidity trap. Does it exist? Is it here? And what does it mean for monetary policy?
Those are critical questions which are not currently being addressed by policymakers, according to a new paper by Paul McCulley and Zoltan Pozsar, presented at the Banque of France on March 26. In fact, many policymakers, they say, are still under the mistaken belief that no such thing as a liquidity trap exists. Read more
Andrew Sentance, senior economic adviser at PwC and former member of the Bank of England Monetary Policy Committee, has just penned this strongly worded think-piece in the FT about the current lack of action stemming from central banks with respect to rising commodity prices.
Safe to say he feels it’s about time central banks stopped turning a ‘blind eye’ to the inflation problem this poses. Read more