CNBC – Janet Yellen could be on the verge of starting a ‘civil war’ at the Fed Fed Chair Janet Yellen’s interest in running a “high-pressure economy” threatens to add to an increasingly divisive climate at the U.S. central bank. In remarks last week that jarred the market, Yellen ruminated about the benefits of letting… Continue reading Understanding Fed Policy
<Click on graphic for larger image> Bloomberg.com – Most Crowded Trade in Bonds Is a Powder Keg Ready to Blow A headlong rush into higher-yielding, long-term bonds in recent years has created one of the most crowded trades in financial markets. Investors seeking relief from central banks’ zero-interest-rate policies have poured into government debt due in a… Continue reading Reaching For Yield
Barrons – Citi’s Three Main Takeaways From Fund Flows Citi’s Robert Buckland and his team take a look at fund flows in a new note, writing that bonds are still king. Other trends that have been building for some time, including money flowing out of Europe and to emerging markets, and the shift from active… Continue reading Fund Flows
<Click on graphic for larger image> The Wall Street Journal – Bankruptcy Bust: How Zombie Companies Are Killing the Oil Rally Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply. It turns out that while bankruptcy filings are up, they have… Continue reading More On Crude Oil Supply
<Click on graphic for larger image> Bloomberg.com – Why Corporate America’s Debt Is a ‘Major Risk’ Are investors in denial about how dim the outlook is for American businesses? That’s the question Société Générale’s Andrew Lapthorne, global head of quantitative strategy, posed to his bank’s clients. “Asset valuations are extreme; returns are poor, the probability… Continue reading Corporate Debt
MoneyBeat (WSJ Blog) – Raining In High-Frequency Traders Ever since high-frequency trading rose to prominence, a debate has raged over whether the ensuing arms race between super-fast traders helped or hindered markets. One side argues that it helps because the massive number of transactions the fastest traders engage in lower costs by reducing the spreads… Continue reading High Frequency Traders’ Effect On Liquidity
The Financial Times – It’s the demography, stupid! Central bankers, like investors, have usually tended to ignore or underplay the influence of demographic factors over the short and medium term. The size and age distribution of the population changes very gradually, and in a fairly predictable manner, so sizable shocks to asset prices from demographic… Continue reading The New Normal
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Comment Yesterday we hosted a conference call titled Looking To 2017. The mp3 replay, webcast replay and handout are below. [audio:https://www.biancoresearch.com/bianco/SubscriberArea/102016.mp3|titles=Conference Call ] Webcast (download if flash video does not work below) [hana-flv-player video=”https://www.biancoresearch.com/bianco/SubscriberArea/102016.flv” width=”600″ height=”495″ description=”” player=”3″ autoload=”false” splashimage=”https://www.biancoresearch.com/bianco/wp-content/themes/twentyten/images/splash.jpg” autoplay=”false” loop=”false” autorewind=”false” skin=”functional” /] [pageview class=”PDFViewer” url=”https://www.biancoresearch.com/bianco/wp-content/plugins/PDFViewer/plugin.php?id=326″]
<Click on graphic for larger image> Bank Underground (BoE Blog) – Bitesize: 250 years of the bond-equity correlation For most of the 18th-20th centuries, government bonds usually behaved like a risky asset. When equity prices fell, bond yields rose, i.e. bond and equity returns were positively correlated (bond prices move inversely to yields). But since… Continue reading A Long-Term Look At The Stock/Bond Correlation
<Click on graphic for larger image> The Economist – Government bonds: Who’s scary now? The bond market is transformed: fewer vigilantes; more forced buyers So should a large number of bond investors decide to sell their positions in risky debt, buyers will be scarce; prices may move very quickly. Yet it is not difficult to imagine… Continue reading Government Bond Trading
<Click on chart for larger image> Value Walk – The Fed Has Made Another Massive Policy Error The Fed’s failure to normalize rates Ben Bernanke made a big mistake by opting for QE 3. Arguably, if he had begun to normalize ratesrather than create a “third mandate” for the Federal Reserve to support stock market prices… Continue reading Should The Taylor Rule Make A Comeback?