There has been major disruptions in Treasury market liquidity, with it being very difficult to sell off-the-run bonds. My initial reaction to these stories is that this is the typical complaining you get from people in any overly-specialised field when something slightly atypical happens. My argument is the worst case interpretation is that this is a reaction to one or major entities' balance sheets blowing sky high. Alternatively, this is just what happens when too many people take finance...
Read More »Breaking Market Trends — Brian Romanchuk
The secular bull market in U.S. Treasury bonds has once again resumed in full force, probably driven by short-covering. Meanwhile, risk markets are in disarray. The main question for markets is predicting when these trends will be broken. Since I do not give market forecasts, I will keep this article short, as I will just outline what I think what needs to be kept in mind.... Bond EconomicsBreaking Market TrendsBrian Romanchuk
Read More »Bill Mitchell — Inverted yield curves signalling a total failure of the dominant mainstream macroeconomics
At different times, the manias spread through the world’s financial and economic commentariat. We have had regular predictions that Japan was about to collapse, with a mix of hyperinflation, government insolvency, Bank of Japan negative capital and more. During the GFC, the mainstream economists were out in force predicting accelerating inflation (because of QE and rising fiscal deficits), rising bond yields and government insolvency issues (because of rising deficits and debt ratios) and...
Read More »Bill Mitchell — Bid-to-cover ratios and MMT
It is Wednesday so very little blog writing today. One question I often get asked is what would happen if the bond market investors in a nation stopped bidding for the debt instruments being offered in the regular auctions. Interestingly, overnight I was sent some news from a Deutsche Bank information service written by their New York-based Chief International Economist, who signs himself off as “Torsten Sløk, Ph.D”. It related to these issues. The problem is that Dr Sløk seemed to want to...
Read More »Brian Romanchuk — If You Want To Understand MMT…
Brad DeLong has written a primer on Modern Monetary Theory (MMT), and just gave an important lesson about MMT: if you want to understand MMT, you need to read a primer written by a MMTer. I am not going to hold myself out as an expert on DeLong's thinking, but I would argue that a fear of bond market disruptions is a constant theme in his writings. Bond Economics If You Want To Understand MMT...Brian Romanchuk
Read More »Ellis Winningham — The Bond Market Doesn’t Control Anything; the Currency-Issuing National Government Does
More myth debunking.Ellis Winningham — MMT and Modern MacroeconomicsThe Bond Market Doesn’t Control Anything; the Currency-Issuing National Government DoesEllis Winningham
Read More »Brian Romanchuk — U.S. Inflation Breakeven Did What Breakevens Do
If you had asked me to structure a bear market trade, a rise in breakevens would have been the bread and butter answer. However, things are starting to get awkward. Breakeven inflation is no longer cheap relative to where the Fed wants inflation to be (and inflation has averaged below where they wanted it for a considerable time). If one is bullish on oil, there is perhaps more room for headline inflation to rise. Otherwise, it will be hard for breakevens to follow the rise in nominal...
Read More »Edward Harrison — Ray Dalio: We are already in a bond bear market right now
Ed Harrison on Ray Dalio on bonds.Credit Writedowns Ray Dalio: We are already in a bond bear market right nowEdward Harrison
Read More »Brian Romanchuk — The Highly Predictable Treasury Bond Bear Market
Brian gives a simple and accessible explanation of bond market dynamics based on his considerable experience in the field as a "quant."Bond Economics The Highly Predictable Treasury Bond Bear MarketBrian Romanchuk
Read More »Bill Mitchell — When intra-governmental relations turned sour – the US-Fed Accord – Part 2
In Part 1 of this mini-series – When relations within government were sensible – the US-Fed Accord – Part 1 – I examined the pre-1951 agreement between the US Treasury department and the US Federal Reserve Bank, which saw the bank effectively fund the US Treasury. The nature of that relationship, which began when the central bank was formed in 1913, changed in 1935 when the legislators voluntarily chose to change the capacity of the currency issuer to buy unlimited amounts of US Treasury...
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