Archive for October, 2014

Kocherlakota Explains His Dissent

Friday, October 31st, 2014

Federal Reserve Bank of Minneapolis President Kocherlakota explained his dissent at this week's FOMC meeting. He thinks that the Fed is risking its credibility on the inflation issue and suggests that Europe and the US are traveling down the same path which took Japan into years of deflation. Via the FT: October ...

Soc Gen Research on Dollar Yen

Friday, October 31st, 2014

Via Soc Gen Research: The Bank of Japan (BOJ) surprised almost everyone with this morning's policy change. Further easing had been widely expected, but not this soon. The BOJ will increase its ‘QQE' program, targeting an annual increase in the size of the monetary base of ¥80trn, up from the previous ...

End of QE May Benefit MBS vs Corps

Friday, October 31st, 2014

Via Bloomberg: IG Corp Investors May Turn to MBS Sector, BNP’s Lohokare Says 2014-10-31 14:08:48.811 GMT By Christopher Maloney Oct. 31 (Bloomberg) -- IG corporate investors may reallocate back into MBS with QE3’s end and continued Fed reinvestments likely to buoy mortgages, BNP Paribas MBS strategist Anish Lohokare writes in client note. * MBS should tighten over next ...

Senate Forecast

Friday, October 31st, 2014

Nate Silver's 538 blog is out with a new forecast of GOP chances of taking the Senate. The current forecast is 68 percent and is the highest probability level the 538 forecasters have assigned to a GOP victory and a demotion of hapless Harry Reid. Here is the complete (and long) ...

TIPS

Friday, October 31st, 2014

TIPS spreads trade quite well today and spreads are nearly back to levels which prevailed just prior to the FOMC announcement on Wednesday. Five year breakevens are at 156.5 versus 157 prior to FOMC. Ten year spreads are at 194.5 versus 195. Thirty year spreads are at 210 versus 211 before ...

Income Spending and Inflation

Friday, October 31st, 2014

Via Millan Mulraine at TDSecurities : The pace of personal spending declined for the first time since January, with nominal PCE falling 0.2% m/m in September, following the 0.5% m/m gain the month before. In real terms, spending activity was also weak, falling 0.2% m/m. The disappointing performance in real spending ...

Swap spreads

Friday, October 31st, 2014

Swap spreads are mixed today. Two year spreads are unchanged at 21 1/2. Five year spreads are 1/4 tighter at 15. Ten year spreads are 1/4 wider at 14.5 and 30 year spreads are 1/4 wider at - 1.5. One dealer offered the view that we are very close to levels ...

Risk On

Friday, October 31st, 2014

Long dated bank and finance paper is 2 basis point to 3 basis points better this morning (on spread to Treasuries). The IG 23 is 1.5 basis points better at 64.5.

Unintended Consequence of Low Inflation

Friday, October 31st, 2014

San Francisco Fed President Williams in an overnight speech opines on an unintended consequence of keeping inflation low. Low inflation implies low interest rates. He notes that if the economy stumbles while rates are low it would mean that the Fed would have to employ unconventional policy again in downturn ...

Extermely Heavy Volumes Overnight

Friday, October 31st, 2014

Via David Ader at CRT Capital: OVERNIGHT FLOWS:  Treasuries were under pressure overnight following the BoJ's surprise announcement of an increased monetary base (i.e. more QE).  Overnight volumes were strong with cash trading at 144% of the 10-day moving-average, while TY came in at 179% of norm.  10s were the most ...