TRUTH WALTON: Interest Rates

Showing posts with label Interest Rates. Show all posts

Saturday, 6 July 2019

Interest Rates: Central Bank Rate Spreads Highest in Over 20 Years

Equally as curious as the new negative interest rate phenomenon is the generous spreads between official Central Bank Policy Rates.

Central Bank Rates:

USD <2.50%
CAD 1.75%
GBP 0.75%
JPY -0.10%
EUR -0.36%

USD-EUR spread = 286bps.

Points of note:

1. The Fed leads the pack (first to act) in terms of interest rate policy, followed by Canada then Britain. Fed policy is a good predictor of global central bank policy.

2. Beginning 2017, The Fed hikes interest rates 8 times, the BOC 5 times and the BOE 2 times; while the BOJ leaves rates unchanged and the ECB actually cuts interest rates further into negative territory.

3. The spread between Central Bank Policy Rates is widest in over 20 years. Post-2008 "central bank policy coordination," is the unofficial policy mantra among policymakers, which implies an eventual conversion of interest rates. This means either The Fed cuts interest rates by about 250bps, or the ECB and BOE hike by a similar amount.

One thing is for sure: interest rate divergences this wide won't last forever.

USD, CAD, GBP, BOJ, & ECB Relative Interest Rate Performance

USD (Blue) vs EUR (Beige) Interest Rate Performance - 275bps Spread

Thursday, 18 October 2018

Fed Funds Rate: Obama's Two Terms vs Trump's First Term

Fed Funds Rate under Obama administration

Under Trump administration (first half of first term)

Thursday, 9 August 2018

Real Interest Rates and Global Quantitative Easing

Provided the bonds had a positive yield there would still be no takers, as the size of the debt of each country would make the payments impossible. this is called QE Forever. if Enron could've waited til today's environment, they'd be $amzn; and Jeff Skilling would be Jeff Bezos.

G8 Nations by Real Interest Rate:

Russia - 4.75%
Japan - (0.80%)
US - (0.90%)
Canada - (1.00%)
Italy - (1.50)
UK - (1.65%)
Germany - (2.00%)
France - (2.30%)

All but Russia have negative rates; which is why Global Central Bank QE will never end. no one will buy negative yielding sovereign debt.

Saturday, 9 December 2017

Ten Reasons not to Buy Gold

"When you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!"
-- J.L.

1. Interest rates and the price of gold have an inverse relationship and the expected path of future rate hikes are to the upside.

2. Fed funds futures indicate that a rate hike of 25bps is the most likely scenario.

3. The rate of interest rate increases is the highest in ten years.

4. The Fed's main concern is containing potential runaway inflation.

5. Economists suggest that GOP tax bill is inflationary.

6. The infrastructure bill will probably be even more inflationary.

7. A wise man once said that buying gold is a way of going long on fear, and business and consumer confidence have hit all-time highs.The infrastructure bill will probably be even more inflationary.
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8. Bitcoin.

9. Palindrome's protege dumped his gold holdings on the day of the election and we're still trading below the opening price of that week.

10. GLD: After a short run-up during the week beginning Nov 27, bears have resumed full control, taking out key support at 120 and closing below August's lows at 118.48.