22 Jun 2016

A Cloud on the Horizon

“Businesses are Falling Behind on Their Loans Like it’s 2008.”   This is a headline that popped up on my Bloomberg TOP news screen recently.  Since the financial crisis, every bank I have talked to has been focused on increasing C&I lending.  After being snake bit by real estate, banks have all chased after commercial loans.  That makes a headline like this particularly alarming and a situation worth further investigation. Looking… Read More

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22 Jun 2016

Bullard’s Errant Dot Matches Market

In the market summary section above the performance table yesterday, I mentioned that St. Louis Fed President James Bullard had broken ranks with his fellow Fed members and his previous statements and said that he expected rates to stay even lower for longer. I made a quick reference to the famous ‘dot plot’ and said that his dots were pretty far from the consensus.  I thought today I would show the dot… Read More

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21 Jun 2016

Bond Market Continues to Surprise

Even though I was on vacation, I couldn’t resist checking market results right before bed (and sometimes during the day).  I was shocked by two benchmark yields: the German 10-year below zero and the US 10-year at 1.57 percent. German 10-year yields have never been negative and the US 10-year has was just 0.18 percent off its all-time low of 1.39 percent, set back in July 2012.  At one point,… Read More

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19 May 2016

Yield Curve Swiftly Shifting

When looking at the shape of the yield curve it’s easy to see that a lot has changed. Low yields overall have certainly pinched bond investors and made them look elsewhere for returns, but not all investors are so flexible. For banks who are restricted in terms of the investments that they are allowed to hold, the decision of where in the bond market to invest is an important one… Read More

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28 Apr 2016

Fed Stands Pat For Now

As expected, the Federal Reserve left policy unchanged.  For the third straight meeting, they left out any assessment of the balance or risks and said that they ‘continue to monitor inflation indicators and global economic and financial developments. The big concern going into the meeting was that the Fed could describe risk as more closely balanced, potentially providing a strong signal for a June rate hike. The statement no longer… Read More

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16 Feb 2016

Fed Policy: From ZIRP to NIRP?

In the third quarter last year, I wrote at least two articles that used the acronym ZIRP, which stands for ‘zero interest rate policy.’  At the time, all of the conversation was about how the Fed was ending ZIRP with their first interest rate hike in seven years. Today is the two-month anniversary of the hike and the discussion has moved from ZIRP to NIRP, which stands for ‘negative interest… Read More

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5 Feb 2016

Interest Rates in Perspective

So far, 2016 has been full of surprises, but most of the attention has gone to wildly volatile oil and stock prices.  Less noticed, but equally important, has been the boost on bond prices, as seen by the dramatic fall in bond yields. The 10-year US Treasury note, the bellwether benchmark, started out the year yielding 2.27 percent, 10 basis points (a basis point is one hundredth of one percent)… Read More

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28 Jan 2016

As Expected, Fed Stands Pat

As expected, the Fed maintained their policy stance yesterday in their first meeting of the year and left interest rates unchanged.  The statement noted that the Fed expected ‘only gradual increases’, given their current economic outlook. The statement revealed their softer view on economic activity by removing its reference to economic activity ‘expanding at a moderate pace’ and noted the slowdown in growth late last year. The also took out the… Read More

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15 Jan 2016

Insight: Fed’s Backing Down

Comments from central bankers have been dovish in recent days – they seem to be backing down from earlier statements that suggested that the fed funds rate could increase by one percent or more this year. St. Louis Federal Reserve President James Bullard noted that ‘with renewed declines in crude oil prices in recent weeks, the associated decline in market-based inflation expectations measures is becoming worrisome.’ He further said that… Read More

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5 Nov 2015

Interest Rates May Head Higher

Yellen’s comments yesterday definitely had an impact on the markets view of what could happen to interest rates in December.  The chart below shows what markets think are the odds of a rate hike at the December meeting since the beginning of the year. You can see that at the beginning of the year, markets thought that the odds of a hike were not particularly high, ranging from 20 to… Read More

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