Futures are up a bit this morning as of 1:00 AM central following yesterday’s massacre.
However, bond yields are again lower. The 30-year long bond just crashed through the 2% level for the first time ever.
Don’t Worry
The Fed has everything under control.
So does Trump, the ECB, Bank of Japan, China, Canada, Australia, and New Zealand.
What can possibly go wrong?
Mike “Mish” Shedlock
Aaaand the 30-year pays less yield than the 1-month. Way to go, Powers That Be, you guys are SOOO smart!
I find this to be just silly funny … too bad it is evidence for impending TSHTF.
Off topic but interesting I think. A few years back Greece leaving the Eurozone (read defaulting on their debts) had the EU underwear all twisted even though Greece is only 2% of the EU GDP. Now, the UK, a much bigger economy, is leaving with no deal in sight. I’d imagine this will result in an increase in the cost of doing business with the UK, or at least some sort of trade disruption.
How do the effects of a hard Brexit compare to a Greek default? I realize this is sort of an apples to oranges comparison of course.
Could it be the negative growth in German GDP and other countries is due to fears about this, as opposed to things generally going to hell in a handbasket (the two are not mutually exclusive).
Does anyone really know what the effects of a hard Brexit will be?
Greece was different. They were going to default and stiff the bankers. The EU wanted to keep them in the EU so they could impose austerity so they wouldn’t default. The same threat doesn’t exist with Britain.
The effects of BrExit will be minimal, since the UK, like the USA, Japan, doesn’t really depend all that much on free trade (compared to JP, GER, Netherlands, arguably even China). From memory, so Google this. I think however BrExit will gut the London financial market, which will knock a percent or so off UK GDP long term. Shame (bad for them, good for NYC, elsewhere).
“The Fed has everything under control.”
…
When Powell did his “mid cycle” adjustment and stocks down a bit. One “expert” said stocks down since FR admitted still a business cycle. Good grief.
People keep blaming Powell for raising rates last year but it was known he was doing it to have some ability to cut without going to zero. Had Trump left the trade issue alone and cut a deal with China the markets and economy would be better and we might be talking about more hikes than a cut. The economy slowed b/c of Trump not Powell.
From Marketwatch …
“Back to Baumohl’s argument, who suggests looking past that argument: “The key determinant that will shape the path of the economy this time won’t be the yield curve or the direction of the fed-funds rate. It’s the extent to which American consumers will offset the damage done by policies that impede world trade and reverse globalization,” he told clients in a note.”
The Hillary-ites, the globalists, the phony democrats, the billionaires who became multi-billionaires, the “We did so well the last 40 years, we need to continue that forever!” jerks, will never stop … to them, all Americans need to do is borrow and spend …
“It’s the extent to which American consumers will offset the damage done by policies that impede world trade and reverse globalization,” he told clients in a note.”
Let’s ignore the damage done by the policy of globalization, which has brought us to this point, eh?
Nothing happens in a vacuum. Action and reaction.
Your certain the Republicans weren’t involved in globalization ? It turns out most of the people that did the best financially are the wealthiest donors to the Republican party today.
I assume that the Fed can only control the short end until they go the ECB plan and just buy the long end. So is the 30 year a market rate? Mainly driven this low by the lack of alternative bonds in the western world? If most of the EU is negative yields, anything positive would like great.
Would this mean that a market rate on short term would be substantially less than what the Fed is trying to maintain?
Is there anywhere we might see a rate that a central bank isn’t manipulating?
When the tide turns, run! Just imagine the thought of a multi decade bear market in both bonds and stocks – a mirror of the dying bull market.
Then we’ll see the monetary ammo come out in force. Followed swiftly by a new monetary system. Finally.
What happens when the tide turns?
Seems to me that if bond prices fall, then given all the rules out there for pension funds and other mutual funds, we might see a stampede, with forced sellers and few buyers.
What is the other possibility, that rates stay negative for ever? How can that happen unless central banks are always willing to buy bonds at negative rates of interest? If they do that, they have to inject more money into the system, and that will create inflation at some point. If inflation starts to take hold, negative interest rate bonds are going to become a fantastic widowmaker.
Negative interest rates suck money out of the system. Banks pay the CB for the right to own them. They’re deflationary.
Yes. And not just negative rates. Monetary policy of low rates and QE is disinflationary.
Not denying inflationary pulse has occurred. Just that it came from fedgov subsidies (student loans + health care) and allowing cartels to thrive (big business … especially in the health care field).
What about the bonds that the CBs buy?
My guess is that they are net buyers of them, and have to issue more currency in order to buy them. They clearly receive less back for them than they pay for them, leaving net cash in the system.
A rather wrong analogy with pension funds: they tend to hold on to their bond portfolio rather more than some speculators. But if contributions+meager returns don’t cover benefit payments, they will have to sell.
Take a page from Mish and censor everyone you disagree with.
Please go away, you jackass. Go pollute some other blog, where you won’t be the only one to “like” your comments.
Start your own blog, seems simple enough
Mish: “What can possibly go wrong?”
See the JGB market
The bond market anticipating the return of the printing presses – and no return to normalcy in a lifetime.
Let’s see what stocks do today. Maybe the market will bounce back. Negative interest rates and a bear market in stocks don’t mix well.
Futures are up based on consumer spending.
I would be surprised at a down day.
Option expiry tomorrow (3rd friday of month). The Players no likey paying out on puts.
Now 16T in negative yielding bonds. We havent even gotten started.
You my be right.
may*
Relax. It’s totally normal. Economists say so.