Tag Archives: FOMC

Congratulations History is made; 10 Year Treasury Breaks a Record!

Posted on May 30, 2012 by | Comments Off

Today the 10 year treasury hit an all time low of 1.62% as of just a few minutes ago. Contrary to the confident headlines you may read tomorrow, the reasons for this are various, possibly cumulative,  and no one knows with certainty. We will give you our thoughts in order of our internal probability for clarity from our side of the fence. So here we go:

  • Fear from overseas issues (Money moving from other fragile economies into ours)
  • Fear of Equity markets (Fixed income has continued positive money flow)
  • Signal of a slowdown here in the US (Low rates often signal a slower economic time)
  • The FED has won – Recall the fed wants lower rates for housing and economic growth (We think this a low probability)

Again, any or all may be reasons, but when you read the possible overconfident headlines, remember no one knows for sure!

Have a Great Day, below is the last chart of the week, we promise!

Friday we will have a fun uplifting post that a fellow professional investor quoted to start your weekend happily!

JK

214-706-4300  www.jkfinancialinc.com

This is a two-day chart of the 10 year treasury yield. Lower chart means lower yield.

Courtesy, TC 2000.

 

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Posted in Interest Rates, Investing/Financial Planning, Market Comments, World Political

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The FOMC Mistake; Calling it as We See it !

Posted on January 26, 2012 by | Comments Off

Yesterday the FOMC released their regular statement regarding policy and actions at 11:30 AM central time followed by an extended live Q&A with the Fed Chief,  Bernanke. We feel the FOMC has made a mistake with their statement.

Here is the specific sentence in the release that has us concerned

“In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

As is often the case when we have a strong opinion, we have made it a point to not read the various analysis before voicing our thoughts.

Here are the reasons we feel this statement was a mistake:

  1. There was nothing gained by pushing the time line out another year right now. Keeping that statement in the hat for this time next year (if necessary) would have been a much safer way to go.
  2. It is too hard to predict what the economic situation is going to be that far in the future (We liked the original runway of time as it pushed any fed decision out-of-the-way of the election.)
  3. Investor  confidence (domestic and more importantly internationally) is paramount in retaining control of US interest rates. In investment professionals minds, holding rates low until next year, no matter the economic situation was feasible. Extending the stated term another year slightly cheapens this statement AND their original statement of low rates until 2013.

“Hot on the Long End”

Ultimately what we will now even more closely watch for is longer termed bonds rates rising.  In Wall Street lingo, it is called getting “hot on the long end.”  Rates have a funny way of making officials and investors eat their words. The FOMC changing their minds in the future would not be the worst thing that has ever happened.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

PS We are not being Zaggers, but do call it as we see it !

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Posted in Economy, Interest Rates, Investing/Financial Planning, Market Comments

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Fed Announcement-No Change Expected-Watching for Clues

Posted on April 28, 2010 by | Comments Off

Federal Reserve

Today at 1:15 pm, central time the Fed will release it’s official statement on interest rates, ending it’s two day policy meeting. While slightly overshadowed by the Goldman Sachs events as of late, the Fed’s statement is extremely important.

What we will be looking for:

Any minor changes to the language that would lead us to conclude tightening is moving closer from the Fed’s point of view. Tightening would eventually mean the increase of short term rates that have acted as an accelerate for our economy over the last several quarters.

What do we expect:

Our expectation is for VERY minor changes in the language, that would let us know the Fed is gaining more confidence in the recovery, but that a rate increase it not coming in the near term.

We will let you know if there are any major differences from prior meetings.

Have a Great Day!

JK

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Posted in Interest Rates, Market Comments

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Federal Reserve to Conclude Meeting, No Change Expected; Fun Website

Posted on March 16, 2010 by | Comments Off

Today the FOMC (Federal Open Market Committee) better known as the  “The Fed,” concludes their two day meeting with a public interest rate, and economic announcement at 2:15 Eastern Time.

We expect no significant changes in the Fed’s statements today, but possibly verbage regarding the recent Discount rate adjustment. Capital Market Participants will review the verbage for clues and changing of language looking for an indicator of a time frame for the eventual rise in the more important Fed Funds Rate. Our suspicion is this change is still a few quarters away, but we will certainly review the statement for clues.

In honor of Spring Break, and if it is raining as hard in your location as mine, you might find this FED 101 site interesting.  

 This is a pseudo animated, and highly pictorial view, of the Federal Reserve, geared towards our educators, but after 20 years of working in this industry, I found several items very interesting, and educational.  

Have A Good Day!  

JK

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Posted in Economy, Interest Rates, Investing/Financial Planning, Market Comments

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Federal Reserve Announcement Today at 1:15 PM Central, No Change Expected, Searching for Clues for the Future

Posted on December 16, 2009 by | Comments Off

Today at 1:15 PM CST the Federal Open Market Committee (http://www.federalreserve.gov/newsevents/default.htm) will release it’s statement concerning the state of the economy, and most importantly, the board’s vote on short-term interest rates.  

While most expect no change in the Fed’s current zero interest rate policy, including ourselves, what investors will be watching for are clues surrounding the future of interest rate policy. Greenspan, during his tenure adopted a much more visible and telegraphed Fed. Bernanke has not only continued with Greenspan’s more public and transparent fed, but taken it a step further with invitations of multiple media outlets and long public interviews. 

Under non stressed circumstances, we expect the FOMC, and the Fed to give investors a head nod in advance that rates will be moving up in the future, several meetings before the actual announcement.

We do not expect rates to be changed today, but we are very interested in the language of the FEDs release and will have our eyes peeled for a change in language that would be a possible head nod for future rate increases.

Have a Good Day.

JK

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Posted in Economy, Interest Rates, Market Comments

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U.S. Dollar, Down and Out, or Not to Worry? (Part One of A Series)

Posted on October 19, 2009 by | Comments Off

With many of the questions much of the headlines are posing along with questions we are receiving from investors, we felt it timely to post a multipart series on the US dollar.

In order to keep this simple, it can get complex very quickly, we are going to focus on the main reasons for currency movement, in our opinion.

Currency fluctuations, in our opinion, are the result of interest rates.  Interest rates are not the only determinate, but, in our opinion, interest rates drive the majority of the currency movement.

Interest rates, compared to other world interest rates, are one of the main drivers for currency fluctuation. (The carry trade, a topic for another discussion, creates much of the currency movement, again, in our opinion.)

Ok, so assuming you agree with the interest rate discussion, let’s compare the goals of two monetary governing bodies, EU and US.

From the Bank of England’s Website, it’s two core purposes: http://www.bankofengland.co.uk/about/corepurposes/index.htm 

“Core Purposes – Monetary Stability: Price stability and monetary policy

The first objective of any central bank is to safeguard the value of the currency in terms of what it will purchase at home and in terms of other currencies. Monetary policy is directed to achieving this objective and to providing a framework for non-inflationary economic growth. As in most other developed countries, monetary policy operates in the UK mainly through influencing the price of money, in other words the interest rate.

The Bank’s price stability objective is made explicit in the present monetary policy framework. It has two main elements: an annual inflation target set each year by the Government and a commitment to an open and accountable policy-making regime.  

Setting monetary policy – deciding on the level of short-term interest rates necessary to meet the Government’s inflation target – is the responsibility of the Bank. In May 1997 the Government gave the Bank operational independence to set monetary policy by deciding the short-term level of interest rates to meet the Government’s stated inflation target – currently 2%

Core Purposes – Financial Stability

The Bank of England has played a key role in maintaining the stability of the United Kingdom’s financial system for 300 years and it is now a core function of most central banks. A sound and stable financial system is important in its own right and vital to the efficient conduct of monetary policy.

Since 1997, the Bank of England has had responsibility for the stability of the financial system as a whole, while the Financial Services Authority (FSA) supervises individual banks and other financial organisations including recognised financial exchanges such as the London Stock Exchange.” 

 Now, from the U.S. FOMC website:  http://www.federalreserve.gov/pf/pf.htm

“The Federal Reserve sets the nation’s monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates.”
 

 As you can see there are a distinct difference in policy from the two governments, leading to dramatically different interest rate decisions.

Greater interest rate discussion in next part of the series.

JK

 

 

  

 

 

 

 

  

 

 

 

 

 

  

 

 

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Posted in Interest Rates, Investing/Financial Planning, Market Comments

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