201711.13
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Broad Market Calibrations: Nowhere Near Good

In later 2014, the Bank of Russia began to repo out eurodollars to local Russian banks. These financial institutions were being increasingly deprived of “dollar” funding on global markets. It made sense that Russia’s central bank would step in on their behalf, redistributing what it could out of its own pocket (though exactly which one…

201711.10
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Chart of the Week: Another Compelling Note of Caution

Leveraged loan prices and WTI tracked each other pretty well during the “rising dollar”, unsurprising given that the oil sector was over-represented in most new deals as the one truly booming part of the domestic US economy.  That was the case on the rebound, too, where leveraged loan prices rose at the same time oil…

201711.08
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The Glut Lives Still In Imagination

While I commend the mainstream media for refraining the past few months from their orthodox tendencies to shout BOND ROUT!!! every time long Treasury yields rise for more than a few days at a time, that doesn’t mean the total absence of the ridiculous. With the long end once again trending lower in nominal yields,…

201711.07
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Bi-Weekly Economic Review: Gridlock & The Status Quo

The good news is that the economy just printed its second consecutive quarter of 3% growth, a feat not accomplished since Q2 and Q3 2014. The bad news is that the growth spurt in 2014 was better, quantitatively and qualitatively. Those two quarters produced gains of 4.6% and 5.2% (annualized) in GDP, much better than…

201711.03
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Ahead, Not Behind

Back in September, the FOMC announced that it was in October going to start normalizing its balance sheet. The policy statement issued that day included all the usual qualifications of “solid”, “strengthen”, and “picked up.” The near-term risks to the economy, it was written, “appear roughly balanced.” Not all was well with the economic situation,…

201710.31
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Bonds And Soft Chinese Data

Back in June, China’s federal bond yield curve inverted. Ahead of mid-year bank checks, short-term govvies sold off as longer bonds continued to be bought. It was for some a rotation, for others a reflection of money rates threatening to spiral out of control. On June 19, for example, the 6-month federal security yielded 3.87%…

201710.30
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The (Economic) Difference Between Stocks and Bonds

Real Personal Consumption Expenditures (PCE) rose 0.6% in September 2017 above August. That was the largest monthly increase (SAAR) in almost three years. Given that Real PCE declined month-over-month in August, it is reasonable to assume hurricane effects for both. Across the two months, Real PCE rose by a far more modest 0.5% total, or…

201710.30
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You Aren’t Supposed To Reject Falsification

Why don’t economists understand bonds? The long answer involves several detours into parts of Economics that have nothing to do with interest rates or even money. More so these places are dominated by discussions of stochastic calculus and partial differential equations. Thus, the short answer is: Affine models of the term structure of interest rates…

201710.26
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Global Asset Allocation Update

The risk budget this month shifts slightly as we add cash to the portfolio. For the moderate risk investor the allocation to bonds is unchanged at 50%, risk assets are reduced to 45% and cash is raised to 5%. The changes this month are modest and may prove temporary but I felt a move to…

201710.25 1

Bond Kings and the Future(s)

Maybe there is hope for the media yet. The benchmark 10-year US Treasury bond yield has passed above 2.40% for the first time in several months. In the past any similar move or technical breakout of the like was met with uniform screeching about a BOND ROUT!!! This time, however, commentary appears at least to…