September 17, 2019
Just as Saudi Arabia was becoming less of a story the NEW YORK FED‘s mishandling of Tuesday’s repo operation has created a new round of angst for traders if not investors. The best coverage on the FED‘s recent efforts to calm the overnight funding markets (and repo turmoil) has been done by Liz Capo McCormick and Alex Harris at Bloomberg News. Now they have another article out discussing another REPO operation tomorrow morning.
Tuesday’s operation injected $53 billion of liquidity, even though $75 billion was on offer. While the FUNDS level went as high as 10% today the repo operation brought the level down to 2.50% to 2.25%, calming fears of any type of solvency/liquidity situation. Even though we’re around the 11th anniversary of the Lehman Brothers collapse, It has been a decade since the markets had to be truly focused on the FUNDING markets so many people are left with more questions than answers.
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Tags: Fed, Fed Funds Rate, FOMC, Jerome Powell, repo market, U.S. dollar funding
Posted in Debt Market, Fed | 8 Comments »
September 15, 2019
The inmates are running the asylum as policy makers are busy putting out old prairie fires. The European Central Bank’s move on Thursday was a final curtain call for President Draghi as he sought to cement his legacy as the man that would do whatever it takes to “preserve the Euro” and would have no taboos in his efforts. But it seems like the opposition to both the rate cut and new QE was far greater than the magician of Frankfurt let on at his final obfuscation. It is amazing how the dissidents find their voice the day after. Oh well, so it goes in the world of consensus-driven outcomes.
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Tags: central banks, copper, crude oil, ECB, Fed, fiscal stimulus, Gold, Mario Draghi, precious metals, Saudi Arabia
Posted in Oil, Saudi Arabia | 13 Comments »
September 10, 2019
We are coming to the end of Mario Draghi and the “Whatever It Takes” era. Remember, the head of the European Central Bank said he would do whatever it takes to preserve the EURO. This fealty to the currency has resulted in a -40 basis point deposit rate, a massive expansion of the ECB’s balance sheet via sovereign and corporate bond purchases.
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Tags: Christine Lagarde, ECB, Euro, fiscal stimulus, Mario Draghi, QE, rate cuts, whatever it takes
Posted in ECB | 19 Comments »
September 8, 2019
Of all the U.S. president’s tweets (and believe he has a lot), Friday’s tweet about Federal Reserve Chairman was one of the best. Unfortunately, there probably should’ve been a comma between “guy” and “Jerome” since one could ask the question about any member of Trump’s economic team. President Trump could be asking the Fed chairman about Secretary Steven Mnuchin, or Commerce Secretary Wilbur Ross, and certainly of Larry Kudlow or Peter Navarro. NOTES FROM UNDERGROUND has been asking that for many months. In my opinion, the only Trump pick that inspires confidence is Robert Lighthizer.
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Tags: Canadian Dollar, currency crosses, ECB, Federal Reserve, Gold, Jerome Powell, Mario Draghi, silver, SNB, Swiss Franc, Thomas Jordan
Posted in Central Banks, Currency, Fed | 11 Comments »
September 4, 2019
Football season in the U.S. is just beginning. That said, it would be appropriate for President Mario Draghi to refrain from any type of new QE program or cut in interest rates at next week’s meeting. There have been several comments from ECB members during the past week advising against more QE or additional interest rate cuts.
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Tags: Bank of Canada, Christine Lagarde, ECB, Euro, French oats, German bunds, Jerome Powell, Loonie, Mario Draghi, QE, rate cuts, Reserve Bank of Australia
Posted in Debt Market, ECB | 23 Comments »
August 29, 2019
Ok, I couldn’t resist the obvious joke. It seems that former New York Fed President Bill Dudley penned an op-ed for Bloomberg in which he elevated the Fed into an actor in the U.S. political process. The message that Dudley initially tried to convey is one that NOTES has actually expressed concerns: That President Trump has trapped Chair Powell by using TARIFFS as a mechanism to bludgeon the FOMC into lowering rates to counter any of the negative impact from trade frictions unleashed on the global economy. Dudley admonished Powell to play the role of Bartleby the Scrivner in Melville’s short story, that when it comes to cutting rates in response to financial implications of the China/U.S. trade war, simply say “I choose not to.”
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Tags: AfD, Bill Dudley, currency war, Federal Reserve, Germany, Japanese yen, Jerome Powell, Robert Rubin, U.S. Dollar
Posted in Currency, Fed, United States | 13 Comments »
August 27, 2019
These Simon and Garfunkel lyrics could apply to the events of this past weekend, the bookends of Jackson Hole and the G-7 meeting. The meaning was best summed up i a Financial Times story that quoted St. Louis Fed President James Bullard, who said, “Something is going on ,and that’s causing I think a total rethink of central banking and all our cherished notions about what we think we’re doing. We just have to stop thinking that next year things are going to be normal.”
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Tags: Bundesbank, ECB, Euro, G-7, James Bullard, Jens Weidmann, no exit, portfolio balance channel, tariffs
Posted in ECB, Europe, G-7 | 8 Comments »
August 25, 2019
John Maynard Keynes’ critical theory said in times of uncertainty economic actors tend to save more, which leads to a negative feedback loop that slows the economy as demand shrinks. This is why governments need to increase fiscal stimulus to boost demand. It’s too bad that President Trump doesn’t exercise the paradox of thrift when it comes to WORDS. Let there be no mistake: We at NOTES have been expecting a response from Trump like this.
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Tags: China, European Union, Fed, G-7, Jerome Powell, tariffs, U.S.
Posted in Fed, G-7, United States | 10 Comments »
August 20, 2019
Whenever I have an appearance on CNBC with Rick Santelli, Europe proves itself as critical to U.S. monetary policy. The past five years have led to dialogue that questions the efficacy of ECB policy and the slight of hand moves by President Mario Draghi. As BUND yields drag all sovereign debt yields even lower, the central bank is struggling to find policies that will keep LOWER FOR LONGER going. It seems that the last play in the book is to provoke Jerome Powell to abandon any NORMALIZATION of interest rate policy regardless of the economic data reported by the U.S.
(Click on the image to watch me and Rick discuss Europe and monetary policy.)
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Tags: BOC, BOE, BOJ, ECB, Eric Rosengren, Fed, Jerome Powell, Mario Draghi, Mary Daly, RBNZ, SNB
Posted in Central Banks, Fed | 6 Comments »
August 18, 2019
The Federal Reserve just won’t admit that President Trump and the European Central Bank are holding its policy designs captive. Trump ramps up talk of tariffs in an effort to keep the financial markets uncertain while the ECB wishes to pursue an ever expanding balance sheet in an effort to reach an ambivalent inflation target. There is no doubt that REAL YIELDS throughout the European Union are NEGATIVE. Even the Italian 10-year is trading around 1.35%, which is below the inflation level however dubious it is calculated.
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Tags: 10-year yields, 5/30 curve, ECB, Euro, FOMC, Gold, Jerome Powell, Olli Rehn, ultra-long bonds
Posted in Debt Market, ECB, Fed, United States | 15 Comments »
