Posted on 12/16/2021 2:04:49 AM PST by Browns Ultra Fan
Like John Belushi from The Blues Brothers, Fed Chair Jerome Powell is saying that the markets lackluster response in terms of bond yields to his “hawkish” announcement yesterday “isn’t his fault.”
Federal Reserve boss Jerome Powell appears unperturbed by the fact that longer-term bond yields remain low even as officials lay the ground work for tighter policy and inflation is ticking higher.
This stands as something of a contrast to the view expressed back in 2005 by one of Powell’s predecessors. Back then, Fed chief Alan Greenspan described a decline in long-term bond yields even in the face of six policy rate increases as a “conundrum.”
Or it could be that no one REALLY believes that Central Banks will ever cut interest rates, despite surging inflation.
The US Treasury 10-year yield dropped 7 basis points overnight and remains just south of 1.50%. The Eurozone remains below 1% (with Germany at -0.358% and France at -0.009% at the 10-year mark). Japan is at 0.039%. This is what Powell means by low global rates keeping US long-term rates down.
The 10-year Treasury term premium (measured before Powell’s head fake on raising rates) has returned to pre-Biden levels.
Meanwhile, global equities futures are up across the board (well, except for Mexico).
Gold rose on Powell’s “Tomorrow” talk while the US Dollar fell.
The Fed could have raised their target rate if they were REALLY interested in cooling inflation. The Taylor Rule remains at 14.94% while The Fed is stalled at 0.25%. Even if you don’t like the Taylor Rule, it still highlights how ridiculous Fed Stimulypto is.
Well, we do have a government-propelled economic recovery, but at a cost of declining REAL wages thanks to the highest inflation rate in 40 years.
(Excerpt) Read more at confoundedinterest.net ...
I suspect people that manage money quite often don’t buy their own groceries.
So, that's what is coming per what the Fed decided not to do yesterday?
BoE (UK) just bumped up rates this AM...only 15 bps tho, to .25%. Big whup! Better than nothing like The Fed tho..
1. Increase savings rate, invest in stocks and hard assets, not bonds or bank deposits.
2. Increase borrowing, spending the money on hard assets like real estate. Do not borrow at ruinously high credit card rates, borrow at mortgage rates (~ 3%).
3. While high end real estate has some appeal, rental properties will allow rents to be raised with inflation.
Perhaps the author meant to say:
Or it could be that no one REALLY believes that Central Banks will ever cut raise interest rates, despite surging inflation.
If long-term rates went up to say, 5%, then interest on the massive federal debt would be $1.5 trillion per year. Total federal receipts during 2020 were $3.4 trillion.
Treasury I-bonds are paying 7.12%.
The composite rate for I bonds issued from November 2021 through April 2022 is 7.12 percent. This rate applies for the first six months you own the bond.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
If you have 10K sitting in bank account, making 0.01%, you might consider this.
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