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term premiums

Good Time To Go Fish(er)ing Around The Yield Curve

By |2022-01-20T20:01:52-05:00January 20th, 2022|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It should be as simple as it sounds. Lower LT UST yields, less growth and inflation. Thus, higher LT UST yields, more growth and inflation. Right? If nominal levels are all there is to it, then simplicity rules the interpretation. Visiting with George Gammon last week, he confessed to committing this sin of omission. Rates have gone up, he reasoned [...]

Dressed Up Delusions of Bad Math: The False Term Premium Inflation Promise

By |2021-05-05T18:20:01-04:00May 5th, 2021|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Deconstructing long-term interests may seem like a purely academic exercise. This is certainly how Economists treat it, coming at them using their statistical models. The goal is always to properly interpret these most basic of economic, financial, and monetary fundamentals so as to understand where everything that matters stands. Getting this wrong is the difference between night and day; between [...]

Global, Not Term Premiums: What Low Yields Really Say

By |2021-05-04T17:18:32-04:00May 4th, 2021|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The standard explanation for low bond yields has been driven by – who else? – Ben Bernanke summing up the view from econometrics. Term premiums, he says, these made-up decomposition components which only allow for QE to save a tiny bit of its face. In other words, QE obviously didn’t lead to recovery, it sure didn’t create modest let alone [...]

Never Attribute To Malice What Is Easily Explained By Those Attributing Anything To Term Premiums

By |2019-10-10T18:16:31-04:00October 10th, 2019|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

There will be more opportunities ahead to talk about the not-QE, non-LSAP which as of today still doesn’t have a catchy title. In other words, don’t call it a QE because a QE is an LSAP not an SSAP. The former is a large scale asset purchase plan intended on stimulating the financial system therefore economy. That’s what it intends [...]

Denying The Curve? Show Your Work

By |2019-08-16T17:40:51-04:00August 16th, 2019|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

One of the primary reasons Economists go unchallenged is because they’ve made the subject matter dense and complex. Needlessly so, in many cases. Anyone in the financial media or the public who wishes to challenge Jay Powell (well, maybe not Powell) on any economic concept is as likely to get a lecture on regressions and the three or four tests [...]

The (Fake) Recovery Behind Record Low Bund Yields

By |2019-06-07T18:03:38-04:00June 7th, 2019|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

No Federal Reserve Chairman under its current configuration can say QE didn’t work. Those words will never pass the lips of whoever it may be occupying that position. The world’s bond markets, however, are trying very hard to make this resistance as uncomfortable as possible. The one thing central bankers here along with everywhere else LSAP's were unleashed could try [...]

Term Bubble Premiums

By |2018-05-17T19:30:19-04:00May 17th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Since nobody can seem to agree on what is an asset bubble, it’s that much more difficult to try and estimate its end. A bubble stops being a bubble only when the people participating decide to question the rationalizations they’ve invented to keep them complacently inside of it. It’s most often just that vague sense the world isn’t turning out [...]

The Bond Market Does, In Fact, Use The Correct Start Date

By |2017-11-21T18:13:37-05:00November 21st, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

First Bernanke, now Yellen. As I wrote earlier today, there is a growing tendency to revise economic history at least as it applies to official actions. Ben Bernanke defends QE from the perspective of 2009 forward, as if 2008 was all just someone else’s problem irrelevant to the world that came after. In effectively resigning from the Fed Chair position [...]

You Aren’t Supposed To Reject Falsification

By |2017-10-30T13:38:30-04:00October 30th, 2017|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 are a popular tool for [...]

Deja Vu

By |2017-08-28T19:13:26-04:00August 28th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

According to orthodox theory, if interest rates are falling because of term premiums then that equates to stimulus. Term premiums are what economists have invented so as to undertake Fisherian decomposition of interest rates (so that they can try to understand the bond market; as you might guess it doesn’t work any better). It is, they claim, the additional premium [...]

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