Posts Tagged ‘yield curves’

Notes From Underground: A Podcast With Top Step Trader

November 21, 2017

During this thin holiday market as markets, it’s important to remind ourselves of the tools that are necessary to have in order to profit in the global financial markets. I had the pleasure to sit down with Eddie to reprise many stories that bring laughter but also knowledge of the markets. Please enjoy the podcast.

As far as Tuesday goes, the equity rally powers on and the yield curves continue to flatten, causing angst among many asset managers. But as the U.S. curves flatten the European curves are actually steepening, which is in contravention to conventional wisdom. The ECB is still building its balance sheet while the FED has actually begun shrinking its $4.5 trillion accumulated asset base. The U.S. curve OUGHT to be steepening while the European should be flattening. My opinion is that the emphasis is on buying the short end of Europe but forcing global investors to seek duration risk in the U.S. with its higher sovereign yields. Just last week, the European junk bond market was actually yielding less than U.S. 10-year Treasuries. I can’t stress it enough: The international market for pricing risk has been terribly distorted by the central banks. This is the environment we exist in for the business we have chosen. I will be on with Rick Santelli on Wednesday at 9:40am CST. Enjoy your Thanksgiving for anyone reading this BLOG has much to be thankful for. All the best, Yra

Notes From Underground: Brainard’s Speech Was So Significant She Delivered It Again

July 13, 2017

Yes, Fed Governor Lael Brainard actually delivered Tuesday’s speech, “Cross-Border Spillovers of Balance Sheet Normalization,” AGAIN. This time it was to the National Bureau of Economic Research Summer Institute in New York City. Of course I jest as to why she redelivered it. Brainard was overshadowed by Chair Yellen’s testimony to the Senate Banking Committee, even though the Fed Chair deviated very little from Wednesday’s House testimony. The interesting thing was that Yellen backtracked on her hubristic statement she made last week about not experiencing another systemic financial crisis in her lifetime. A brazen statement like that is Greenspanish but certainly out of character for the demure Janet Yellen.

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Notes From Underground: G-20 and Unemployment

July 6, 2017

The data “dependent” FED will have a look at the unemployment report Friday and hope to see VERY ROBUST gains in NONFARM PAYROLLS, but most importantly, to see a 0.4% rise in WAGES in order to deflect from  the recent criticism directed at them. The consensus is for an increase of 175,000 jobs and for an average hourly earnings to rise 0.3%. If the data is tepid, the long-end of the curve will attempt to rally, a reversal of the SIGNIFICANT steepening of yield curves seen during the most recent selloff in developed bond markets.

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Notes From Underground: Let’s Look at Global Yield Curves

February 7, 2017

One of the most important indicators for financial markets is yield curves. They are predictive as they have historically shown coming economic turmoil, or, more importantly, the end of a business cycle. The severity of any recession depends on the amount of debt that has preceded the onset of an economic slowdown. I will remind readers that before the 2007-08 financial crisis, the U.S. 2/10 curve actually INVERTED to NEGATIVE SIX BASIS POINTS. Some financial pundits like to cynically advise consumers that the STOCK markets have predicted 10 of the last 5 recessions, but that is not so with yield curves. The difficulty with the signalling mechanism of yield curves is predicting the time for even during the GREAT RECESSION equity markets continued to rally even as the curve flattened.

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Notes From Underground: Oh, Janet, There Is A Santa Claus Rally Brought About By the QE Rain

December 13, 2016

Yes, the day of decision is upon us and everybody is SURE of a 25 basis hike from the FOMC. IF I WAS IN CHARGE–NO, NOT JOSE CANSECO, WHICH WOULD BE MONETARY POLICY ON STEROIDS–I WOULD RAISE RATES 50 BASIS POINTS AND ISSUE A WARNING OF MORE AGGRESSIVE INCREASES TO COME. Alas, I am but ashes and dust. The FED has prepared the market for a certain 25 but here are the things to watch:

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Notes From Underground: Mario Draghi and the Wisdom of Samuel Beckett

December 8, 2016

“When you’re in the shit up to your neck, there’s nothing left to do but sing.” This is what Samuel Beckett wrote and it was the way President Mario Draghi performed today. Never in the history of central banking has a policy maker spewed so much crap about monetary policy and the annals of central bank shenanigans is voluminous. The EURO CURRENCY rallied 1 percent on the headline of the ECB‘s desire to cut monthly purchases to 60 billion euros a month but announced that the duration of QE would be extended through December 2017. So tapering on a monthly basis, but not on a longevity measurement.

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Notes From Underground: Global Politics Will Keep Volatility Elevated

October 10, 2016

Increased volatility is not debatable. It will be the outcome of the uneasiness of global politics. It seems that the present state of affairs reflects the vast chasm between those who have benefited from GLOBALIZATION and those who have seen their lives and incomes being disrupted by a world experiencing dynamic change. Brexit was a vote of the nationalists versus the Davos crowd, or those seeking the comfort of the world they know versus those who have profited mightily from the first mover advantage of being prepared for the post Berlin-wall global economy. The central banks’ efforts to prevent a massive liquidation of global assets and harm that would have befallen the global economy as left many participants in a state of financial repression.

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Notes From Underground: Unemployment Data In the Time of Janet’s Fed

March 31, 2016

It is the end of the first quarter and it was an amazing time to be a volatility fabricator in the land of algo-driven headline readers. This quarter has seen a great deal of ebbing and flowing for the global equity markets as China, the Fed, the ECB and BOJ have created fear and greed in copious amounts. But as the SPOOS have ended 0.8% higher (after being up 11% in February), the world is well for U.S. domestic investors. The remainder of the developed world equity markets have not fared as well even as its central banks have been very involved in creating new rounds of liquidity and driving their lending rates into negative territory. The DAX and Japanese equity markets seem to be trapped by anemic growth, as well as appreciating currencies. The recent noise from the FED seems to have caused a REVERSAL IN LONG DOLLAR POSITIONS as the short dollar trade was every major investment bank’s favorite trade for 2016. So  it goes.

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Notes From Underground: Mother Dove Commands Respect From the Baby Chicks

March 29, 2016

Today was the proof positive that the FOMC is under the command and control of Chair Yellen. As they said about Maggie Thatcher, “This lady is not for turning.” Yellen is a lonesome dove–if we bother to listen to the chirping from the baby hawks (EYAS in the bird world). It is these EYAS who ultimately say YES to everything the Mother Dove asks. There have been very hawkish speeches from FED governors and presidents during the last six weeks but still the vote at the MARCH FOMC was 9-1. There may be many EYAS but Yellen rules the roost. If Stanley Fischer had any sense he would resign and head back to academia where he carries far more weight.

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Notes From Underground: Is It a Nehru or NAIRU?

February 9, 2016

Tomorrow begins the semi-annual testimony of the Fed chair before the illustrious houses of legislature of the United States. Janet Yellen will testify before the House Financial Services Committee tomorrow and the Senate Banking Committee Thursday. Chair Yellen will read the same prepared speech before each Committee and then each member of the Committee gets a preset allotted time to ask questions. (Please note, Yellen’s testimony will be released at 7:30am CST tomorrow.) The chair will dodge predictions but will put forward the most recent DOT PLOTS and FOMC statement as the backdrop to her testimony. THE MOST INTERESTING ASPECT WILL BE WHETHER OR NOT THE FED CHAIR SOFTLY CRITICIZES CONGRESS FOR NOT DOING MORE TO PUT FORWARD SOME TYPE OF FISCAL STIMULUS. Chuck Schumer may believe the FED is the only game in town but Chair Yellen will plead that the FOMC cannot be the sole stimulant to a moribund economy, especially with the headwinds blowing around the globe.

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