Tagged: Bernanke

The Day Today 19 May 2014

* Ben Bernanke (remember him?) has been spreading the word about “lower for longer” at a series of $250k dinners with wealthy investors. One attendee claimed Ben had said rates would be unlikely to reach the long term average rate of 4% during his lifetime. Another attendee was “shocked” that Bernanke said the 2% inflation target isn’t a ceiling [which rather begs the question of whether the attendee has had their head in the sand for the past few years]. Two hedge fund managers are quoted by Reuters as saying they should have paid more attention to Bernanke’s comments [suggesting that wrong positioning is as much to blame for the US Treasury rally as anything else] http://reut.rs/TkXoy1
* Carney warns over the housing market, we need to build twice as many houses as we are – but we know from the Inflation Report press conference that macroprudential policy from the FPC will be used to act, rather than rate hikes [can he keep the MPC together on this view?] http://on.ft.com/1p57ZXM
* AstraZeneca Rejects Pfizer’s Sweetened £69.4 Billion Takeover Proposal, which Pfizer said was final {fifw NSN N5T7XA6K50YD <go>}
* Deutsche Bank plans to raise 8bn EUR to provide extra capital, 2bn comes from the Qataris and the rest is a rights issue in June {fifw NSN N5T8C96JTSEH <go>}
* Corporate Earnings Leave U.S. Stocks Wobbly http://on.wsj.com/1gfJcjL
* But is it time to buy the dip?: ‘Global money managers raised cash holdings to a two-year high this month and say America is the worst place to invest, a Bank of America survey published last week shows.’ {fifw NSN N5SIL66JTSE8 <go>}
* Can the ECB deliver? Certainly it’s all teed up, with EUR 500bn figures being thrown around and the ECB Chief Economist recommending negative deposit rates:
Spiegel: ECB’s Praet wants 10bp refi rate cut and -10bp depo rate http://reut.rs/1hWSQ6a
BBRG: Draghi Isn’t Doubted as Economists Await ECB Policy Stimulus {NSN N5T87V6K50YD <GO>}
Sunday Times : ECB to act as deflation stalks the eurozone http://thetim.es/1jY4geJ
* Ryanair Profit Drops for First Time in Five Years as Competition Increases {fifw NSN N5TA246JTSEP <go>}

The Day the Fed fired the starting gun

After several months of teasing the market, the Fed finally delivered its taper. A week before Christmas, this was a punchy move. The message was clear too. In his response to the first question, Bernanke reiterated this key line from the statement: [If the data turns out as well as expected], ‘the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings’. Every time he was asked whether they might take the tapering back, Bernanke didn’t take the bait. Of course they will be flexible, he said, but let’s see how this goes first.


Equity markets seem happy to hear the economy is recovering; that the event risk over a taper has been removed without (yet) causing yields to spike. But make no mistake, this was a hawkish meeting:
– They didn’t change the 6.5% unemployment threshold. Sure, they added they’d wait until they were “well past” that level before hiking, but Fed speakers have been emphasising “threshold not trigger” since September anyway
– They didn’t add an inflation floor
– They didn’t cut the IOER
– They didn’t slash their inflation forecasts
– They did cut their unemployment forecasts – the biggest change being 2014 at 6.3%-6.6% from 6.4-6.8
– Although the median Fed voter sees 2016 rates at 1.75% from 2%, the dispersion saw some voters go for higher rates
– Although one more voter sees rates rising first not until 2016, there are still 2 who see rates rising in 2014
So two members of the board can see, now, that rates could go up within 12 months. With interest rates having been zero  for 5 years, and “lower for longer” the central bank mantra for the whole of that period, it’s easy to be lulled into thinking cheap money will be around forever. Central banks don’t want you to panic as they try to normalise. The question is, do we think the taper tantrum of June this year was just a bad dream? Or was that the moment when we started to wake up?
The rally in the dollar, and rise in US rates, suggests those markets are indeed waking up. Equities have form in lagging – after money markets froze in the summer of 2007 they rallied for another 3 months before noticing. Data will be key – not just employment now but inflation, which has hit a softer patch of late. Get ready for 2014: the year when the global economy walks out the hospital unaided and stumbles to the sunlit uplands.

The Day Today 31 Oct 2013

* FOMC last night dropped reference to “tightening of financial conditions” but that’s not surprising given their lack of taper did the easing for them!

* Eurozone inflation slows to 0.7%, expected unch at 1.1%, Unemployment 12.2% vs exp unch at 12.0%

* US Treasury has others in its sights: no word on China as a currency manipulator – now they blast Germany’s policies “Germanys anemic pace of domestic demand growth and dependence on exports have hampered rebalancing … The net result has been a deflationary bias for the euro area as well as for the world economy” http://on.wsj.com/1cs4gBv
* Nowotny Says Must Avoid Falling Off Cliff as LTRO Comes to End {fifw NSN MVIPXH6JTSED <go>}
* UK House prices +1% vs exp 0.7% and 0.9% prior
* Chancellor Osborne considering imposing CGT on foreign owners of British property in the Autumn Statement, according to Sky  http://bit.ly/1ge9EIZ
* UK GfK Oct consumer confidence, falls for 1st time in 6mths to -11 vs -8 exp and -10 prior
* BOJ leaves policy unch, retains 2% inflation target, lifts 2014 GDP forecast to 1.5% from 1.3%
* Japan Housing Starts a blockbuster +19.4% vs 12.1% exp and 8.8% prior
* Japan construction orders surge 90%! from +21% prior
* Japan inflation fails to pass through into wages, with latest earnings up just 0.1% although above exp -0.4% and prior -0.6% (revised down to -0.9%)
* RBNZ, the central bank who have previously intervened to sell their currency, now say that NZD gains may provide scope to delay interest rate rises  {fifw NSN MVI41M6KLVR9 <go>}
* Goldman Shrinking Pay Shows Wall Street Poised for Bonus Gloom {fifw NSN MVIK7U6S972W <go>}

The Day Today 18 Oct

* RBA Governor Stevens says it all: • “I think the direction I suppose is not entirely surprising. The Fed was expected to taper then they didn’t. I think most people seem now to expect that while it will happen, it won’t happen for a little while yet. And so we’ve had some reversal of the earlier decline in our exchange rate. It should be added as well that we’ve had more positive data from China I think than some people expected I think.” {fifw NSN MUUHAK6S972U <go>} * AUD gained then lost 15pips on these headlines at 4am: – AUSTRALIA CENTRAL BANK GOVERNOR STEVENS: HIGHER A$ STILL SUSTAINABLE – CORRECT: AUSTRALIA CENTRAL BANK GOVERNOR STEVENS: HIGHER A$ NOT SUSTAINABLE Direct quote:  “I’d prefer it to be lower than this rather than higher.”

* Mitsui Life to increase AUD 10yr debt holdings (FX unhedged) and Euro bonds (hedged), as well as Jpn bonds {fifw NSN MUUKKW6KLVR5 <go>} * BOJ Iwata: won’t take incremental steps, won’t stop easing even if 2% inflation comes closer, weak yen helps Jpn economy {fifw NSN MUUSVZ6JTSEZ <go>}

* European confidence persists, with the most “block sales” (large shareholder stakes) in European companies since 2004 {fifw NSN MUUS4G6JTSFN <go>}

* China data solid: GDP 7.8% vs 7.8%exp and 7.5% prior IP 10.2 vs 10.2 and 10.4 Fixed Assets 20.2 vs 20.3 and 20.3 Retail Sales 13.3 vs 13.5 and 13.4

* Updated US data releases: Sept NFP due next Tuesday 22nd Oct Oct NFP due a week later than normal – Friday 8th Nov PPI is Tuesday Oct 29 CPI is Wed Oct 30 http://www.bls.gov/bls/updated_release_schedule.htm

* Fed could taper as soon as December – FT  http://on.ft.com/1evODpU * “I wouldn’t rule out Dec or Jan as possibilities” – Hilsenrath http://on.wsj.com/19VMi8B

* Betting tips for the weekend:

The Queen Henry Stakes

Diabetic Charlie 3/1 fav  Two Headed Sex Beast 4/1  Mrs Boothroyd’s Holiday Dancer 20/1  The Rest 50/1 bar

The Day Today 10 Oct

The Fed are data dependent now, and, er, there isn’t any data…paralysis to persist until US debt ceiling – and shutdown – resolved. Unusual equity market response whereby cash prices aren’t moving much, but implied vols moving higher as derivatives in demand as insurance. * FOMC Minutes: “several” members said no taper was “close call”. ” A number pointed to heightened uncertainty about the course of fiscal policy, which posed downside risks to the outlook”  {NSN MUFGSO3H0JK2 <go>}

* Debt-Limit Prospects Gain as Both Sides Open to Short-Term Deal {NSN MUFLEN6K50Y9 <GO>}  http://bloom.bg/1bIVdeZ

* Japan record sellers of foreign bonds last week, but note money mkt flows were net zero, so no sign they’re offloading US T-bills

* Australia employment +9k vs +15k exp and -11k prior * NZ Sep PMI 54.3 vs 57.1 prior

* Korea keep rates unch at 2.5%, Brazil hike 50bp to 9.5%, all as exp

* Swedish data disappoints: IP -2.3% vs +0.5% exp and +0.7% prior. CPIF YOY 0.9% vs 1.1% exp and 1.2% prior * Norway inflation volatile: YOY CPIATE from +2.5% prior to +1.7% in Sept