Borrowing Costs

GoldCore's picture

Given the spate of recent poor economic numbers in the U.S. and internationally, analysts are beginning to question the veracity of some of the U.S. government's economic statistics including their jobs numbers today. “The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie ...”

The Long View: Is The Bull Market In Bonds Almost Over?

There has been much debate about the current low levels of interest rates in the economy today. The primary argument is that the "30-year bull market in bonds", due to consistently falling interest rates, must be near its end. Of course, this debate has devastated the "bond bears" who have consistently been frustrated by lower interest rates despite their annual predictions to the contrary. However, just because interest rates are currently low, does this necessarily mean that they must rise?

US Manufacturing "Remains In Low Gear" - Hovers Near One-Year Lows

Having fallen 4 months in a row in December to its lowest since last January, one could have been forgiuven for expecting the ubiquitous hope-driven bounce we so often see in soft-survey-based data and sure enough, Markit's US Manufacturing PMI eked out a very small (53.9 vs 53.7 previous) rise in January - hovering at practically one-year lows. On the heels of China's disappointment, it appears the cleanest dirty short of America is not decoupling too much (if at all). This is not the "crisis has passed", "economy is strong" narrative-confirming data that Obama and The Fed would have everyone believe and as markit notes, “Manufacturing remains in a lower gear compared to that seen last summer... adding to the suspicion that the pace of economic expansion in the first quarter could even fall below the 2.6% rate seen in the final quarter of last year."

Frontrunning: February 2

  • Germany Sees No Need to Scrap Troika in Overseeing Greek Turnaround (WSJ)
  • European markets subdued as Chinese data weighs (Reuters)
  • U.S. Oil Workers Strike Enters Second Day as Crude Prices Slide (BBG)
  • Oil prices rally above $55 as investors pile in (Reuters)
  • Obama Wants a New Tax on U.S. Companies' Overseas Profits (BBG)
  • If Trading Bonds Is Hard, Think About Pain When Rates Rise (BBG)
  • Julius Baer Braces for Swiss Franc Impact (WSJ)
  • Coke, Budweiser win as Super Bowl ad battle gets serious (Reuters)

Denmark Launches "Back-Door QE", Halts Treasury Issuance: Why DKKEUR Could Be The "Trade Of 2015"

What Denmark has just done is "back-door QE", because as some forget, there are two ways to push the price of an asset higher (thus pushing its yield lower in the case of a bond): increase demand, which is what conventional QE does when central banks buy bonds, or reduce supply. Which is what Denmark just did by completely cutting off all Treasury issuance "until further notice". As a result, paradoxically, increasingly more speculators are betting that the "Trade of 2015" could be doing precisely the opposite of what the Danish central bank is hoping will happen: i.e., shorting the EURDKK (or going long the DKKEUR) in hopes that when the Danish peg finally does break, it too will result in long Swiss France-type profits.

Frontrunning: January 29

  • Who Doubts Yellen's Policies? Summers for One (BBG)
  • Samsung, Apple Back in Dead Heat for Global Smartphone Dominance (WSJ)
  • Islamic State purportedly sets new deadline for hostage swap (Reuters)
  • Turkey's $7.9 Billion Mystery Money That's Simply Vanished (BBG)
  • How a Two-Tier Economy Is Reshaping the U.S. Marketplace (WSJ)
  • U.S. Prisons Grapple With Aging Population (WSJ)
  • Hasenstab Sees $3 Billion Vanish in Ukraine as One Big Bet Sours (BBG) - maybe he should BTFD, pardon, "invest" in Belarus next?
  • Belarus May Seek Debt Restructuring in 2015, President Says (BBG)

Jeff Gundlach Warns "The Fed Is About To Make A Big Mistake" (& That's Why Bond Yields Are Crashing)

Since The FOMC's "hawkish" statement, bond yields have utterly cratered as near-record speculative short positioning in bonds unwind the long-end (and worries about international problems - "and readings on financial and international developments"). However, fundamentally speaking, DoubleLine's Jeff Gundlach explains, the Federal Reserve is on the brink of making a big mistake simply put, "if Fed Chair Janet Yellen goes ahead with this plan (to raise rates for 'philosophical reasons'), she runs the risk of having to quickly reverse course and cut interest rates."

GoldCore's picture

So who pays? Someone has to, you can not just create money out of thin air. The answer is “we do, you and I”, in the form of a devalued: currency, diminished savings and devaluing pensions.

You are witness to possibly the greatest economic slight of hand ever perpetuated on a people, when the long gaze of history looks at this decision, deflation fears will not be part of the final analysis, arrogance, stupidity and theft will be.