One of the most anticipated FOMC meetings concludes today, and the big questions are if, when and how would the Federal Reserve start tapering its asset purchase programs.
First the critical feeds and material links, followed by
articles and commentaries (from latest to newest). I will update the post during the next couple of days. Last update 22-June 09:00 GMT.
Video feed 1 – ustream
Video feed 2 – C-Span Live
Fed Statement Changes Tracker – WSJ
FOMC data site – FED
* * *
Live Blog: Bernanke Press Conference – WSJ
LIVE: BEN BERNANKE VS. THE MARKET – BI
Liveblogging the FOMC and Bernanke's press
conference – Wonkblog
/ WP
Live markets commentary from FT.com – alphaville / FT
* * *
MEETING JUNE 19
FOMC statement June 19 – FED
Economic Projections June 19 – FED (pdf)
Accessible material – FED
MEETING MAY 1
FOMC statement May 1 – FED
Minutes of the Federal Open Market Committee, April 30-May 1
– FED
MEETING MAR 20
FOMC Statement May 20 – FED
FOMC Press Conference Mar 20 – FED
(includes video, transcript
pdf)
Economic Projections Mar 20 – FED
(pdf)
Accessible material –
FED
* * *
Previously on MoreLiver’s:
* * *
22-JUNE
The Federal Reserve: Clearer,
but less cuddly – The
Economist
Fed Seen by
Economists Trimming QE in September, 2014 End – BB
The Fed will trim its monthly bond purchases to $65 billion in September
and end buying in June 2014, according to the plurality of estimates by economists
in a Bloomberg survey.
Unwinding
quantitative easing – voxeu.org
Stephen Grenville: Chairman Bernanke’s hints about the end of
quantitative easing (QE) have produced volatility in financial markets. This
column argues that financial markets were startled because an end to QE is
likely to cause capital losses for bond holders since term premium is
substantially negative. Bank regulators should be alert to the possibility.
This fundamental explanation is teamed with widespread confusion among market
participants about how quantitative easing actually works.
Is This The Chart
That Scared Bernanke Straight? – ZH
The fails-to-deliver has surged. This critical indicator of both
collateral shortages and technical carry trade unwinds is a little-discussed
indicator of just how broken the market is
7 charts that tell
the Fed not to taper QE3 – MarketWatch
Commentary: There’s been no real, sustainable improvement in jobs
Fed's Bullard
Explains His FOMC Dissent: Disagrees With Tapering In Light Of Deteriorating
Economy – ZH
James Bullard: This
is why I dissented at the Fed meeting this week – Wonkblog
/ WP
He sat down with us Friday morning at the Madison Hotel in Washington to discuss his
dissent, his views on the state of the economy and why Wednesday’s Fed policy
move represents a more hawkish FOMC.
In his own words:
Fed’s Bullard explains dovish dissent – MacroScope
/ Reuters
Hilsenstory – Tim
Duy’s Fed Watch
Bullard was in the room and concluded the same thing markets
concluded: The Fed shifted in a hawkish
direction this week. Bernanke might have
tried to cushion the blow, but you can't avoid the reality that he he laid out
a plan to end QE - and that plan involves a shift toward a calendar
component.
It's About The
Calendar – Tim
Duy’s Fed Watch
I don't see how you can read Bullard's statement and not conclude that
the primary consideration for scaling back asset purchases is the
calendar. I think that the date, not the
data, is more important than Fed officials like to claim.
Bullard’s Unusual
Dissent – WSJ
Bullard put his own statement on the St. Louis Fed’s website this
morning. It was an unusual move, but “everything is unusual at the Fed these
days,” Wessel said.
More Thoughts on QE3
Taper Timing – Calculated
Risk
The most likely meeting for announcing tapering this year is in December…probably
the final press conference for Ben Bernanke as Fed chairman.
Reminder: For Fed to
Taper, Economy Must Hit Rosy Forecasts – WSJ
Bond investors have learned not to fight the Fed when it comes to its
easing policy, but what about the economic forecasts that are today, more than
ever, key to driving that policy?
Fed’s Bullard
Explains Dissent – WSJ
Bullard, says he dissented at this week's Fed policy meeting largely
because inflation is running well below the central bank's 2% target and said
the committee should have waited before authorizing Bernanke to detail a plan
to reducing the size of the Fed's bond purchases.
Economists Think Markets’ Taper Tantrum Is
Temporary – WSJ
This most likely
wasn't the reaction Federal Reserve officials wanted.
Grading Bernanke on Communication – WSJ
David Wessel offered
four tests for grading Bernanke’s success in clarifying the Fed’s intentions on
the bond-buying situation. Stock and bond markets fell during and after his
comments, but how did he do on clarity?
Investors Turn on Fed – WSJ
In other words, when
the economy finally recovers for real, one result will be a fair amount of pain
in the bond market. Rates can’t stay at the historic lows of recent years.
The Fed begins its long and gradual exit – Gavyn
Davies / FT
What Bernanke's plan means for world markets – TradingFloor
Teis Knuthsen: Contrary
to expectations, the FOMC this week delivered an exit strategy for QE. If QE is
unwound, how will this impact not just the US, but also more peripheral markets that have
benefited from the liquidity creation?
Why are markets confused? – TradingFloor
Steen Jakobsen: I am
slightly perplexed as to why the market has such a hard time comprehending and
adjusting to the subtle changes made by the US Federal Reserve over the past
two FOMC meetings. To me, the Fed's actions appear rather straightforward and
logical and this may be a good thing for markets and the next recovery phase.
20-JUNE (LATER ADD)
The Fed begins its long and gradual exit – Gavyn
Davies / FT
When we look back on
the FOMC meeting on June 19 2013, it will probably be seen as the moment when
the Fed signalled that it was beginning the long and gradual exit from its
programme of unconventional monetary easing.
As good as it gets – Free
exchange / The Economist
I understand that the
Fed is generally uncomfortable with unconventional monetary policy and has
concerns about the side-effects from large-scale QE. That's eminently
reasonable. The trouble is that the Fed seems not to have learned that aiming
to overshoot on the pace of employment growth and inflation is the safer, more
conservative route. Overshooting maximises the chance that monetary policy will
maintain its potency the next time trouble hits.
Bernanke Has a Small Margin to Work With – WSJ
Banks traded some
essential loan revenue for survival. It was a good deal until recently, when
the new era of chronically low interest rates put banks in a zero-growth
squeeze. Since 2008, interest rates charged to money-center banks have been
essentially zero.
The Fed’s Spinal Tap – WSJ
Can You Hear Me Now? – The Big
Picture
Despite market
reactions, it is unlikely that economic growth or the unemployment situation
would justify a policy change in 2013, especially given the recent declines in
the break-even inflation rates. Deflation, not inflation, is likely to be the
short-term trump card concern that would dissuade the dovish FOMC from
modifying even its asset purchase program this year. Markets won’t like this,
and so we expect elevated volatility and risk premia combined with turbulence
in debt markets
Bernanke and markets, crazed and confused – alphaville
/ FT
Before the presser on
Wednesday, Ben Bernanke’s vague definition of “substantial improvement” in the
outlook for labour markets resembled the old line about porn: he’ll know it
when he sees it.
Bernanke Kills Fed Credibility and the
Confidence Fairy in One Shot –
naked
capitalism
http://www.nakedcapitalism.com/2013/06/bernanke-kills-fed-credibility-and-the-confidence-fairy-in-one-shot.html
Fed’s Economic Projections – Myth Vs. Reality
(Jun 2013) – EconoMonitor
Four Charts to Track Timing for QE3 Tapering – Calculated
Risk
It is possible that
the FOMC could start to taper QE3 purchases in December, but it would take
a pickup in the economy. (September
tapering is less likely, but not impossible - but the pickup would have to be
significant).
MARKET
REACTIONS
Taper On, Risk Off – ZH
Surveying The Global Damage – ZH
With the US equity markets only 2 to 3% off their highs,
we thought it appropriate to look around the world at where the leveraged
equity unwinds so far.
20-JUNE
FOMC afterthoughts: Tapering is coming – TradingFloor
Juhani Huopainen: The
Federal Reserve is now committed to tapering the asset purchases and ending the
programme by mid-2014 - but only if everything goes as planned.
Bill Gross: "Bernanke Might Be Driving In
A Fog" – ZH
The error of their
policy-making ways is "to think that is a cyclical as opposed to a
structural problem in terms of our economy."
A Potentially Tragic Taper – Krugman
/ NYT
Analysis on Tapering QE3 – Calculated
Risk
I don't think the Fed
will have enough positive economic data to "moderate the monthly pace of
purchases" by September. Right now it seems likely they will start
tapering in December or in early 2014.
7% Unemployment: The Fed’s Newest Threshold – WSJ
Bernanke Sees Beginning of End for Fed’s Record
Easing – BB
Bernanke is putting
investors on notice that the central bank is prepared to begin phasing out one
of the most aggressive easing programs in its century-long history later this
year.
FOMC meeting - conclusion and aftermath – TradingFloor
Nick Beecroft: The
FOMC statement and Bernanke’s comments at the FOMC press conference last night
were almost exactly as we had expected, both in content and tone.
Markets Contemplate Cold Turkey as Fed Outlines
Plans for Withdrawal – WSJ
So the markets’
stimulus addicts are heading for phased rehab as long as the most important
patient shows signs of improvement.
The long goodbye – Free
exchange / The Economist
It looks as if we are
headed for a period in which good news on the economy is bad news for the
markets.
Bernanke’s Forward Guidance Is Transparent as
Mud – Clive
Crook / BB
Federal Reserve
Chairman Ben S. Bernanke seemed a little nervous at his June 19 news
conference.
Ignore the 'Taper,' Focus on Fed Rate Hikes – Matthew
C. Klein / BB
Markets Got Bernanke's Message – Mark
Whitehouse / BB
Four Reasons Inflation Is Too Low – Evan
Soltas / BB
19-JUNE (AFTER, 21:40 GMT)
Lone Dissenter No More: Fed Officials Have
Divergent Objections – WSJ
Kansas City Fed
President Esther George again opposed the FOMC decision to press forward with
its bond buying stimulus…Meanwhile, St. Louis Fed boss James Bullard took an
unexpected path and dissented in what was effectively the opposite direction.
Bernanke’s Taper Timetable Spooks Investors – WSJ
Bernanke signaled the
central bank could start pulling back its $85 billion-per-month bond-buying
program later this year. It could be wound down by the middle of 2014 if the
unemployment rate hits a projected 7%.
Flash Comment: FOMC: QE tapering this year but
at moderate pace – Danske
Bank (pdf)
FOMC Statement: Second Reaction – Tim
Duy’s Fed Watch
Yes, as always,
everything is data dependent. But the
Fed believes the current path of data is sufficient to justify scaling back and
ending the asset purchases program.
Tightening policy via rate hikes, however, is still far in the future.
SocGen Taper Tantrum Post-Mortem – ZH
"FOMC On Track
For September Tapering"
19-JUNE (AFTER, 20:00 GMT)
The Fed won’t be
pressing down on the brakes any time soon. It may, however, take its foot off
the gas…The market didn’t exactly love the attempt.
This graph shows how bad the Fed is at
predicting the future – Wonkblog
/ WP
Higher projections are
no reason to celebrate, given the spotty track record.
Fed expects to slow QE later this year – Nordea
The Federal Reserve
signalled today that it is on track to begin scaling back its monthly USD 85bn
bond purchases later this year if the economy doesn’t disappoint.
19-JUNE (AFTER, 19:30 GMT)
No Tapering Now, But Worries Intensify – WSJ
Stocks dropped
immediately after the release of the FOMC statement as a brighter economic
outlook stoked concerns that the central bank could start “tapering” sooner
than later.
Bernanke Speaks, The Stock Market Squeaks, The
5 Year Shrieks – ZH
Steen Jakobsen: Similar to our expectations but
not the markets – TradingFloor
Bernanke Says Fed on Course to End Asset
Purchases in 2014 – BB
Fed Decision: Breaking Down the FOMC Forecasts – BB
Fed Sees Unemployment as Low as 6.5% by
End-2014 – BB
Fed keeps buying bonds, sees economic risks
easing – Reuters
The Federal Reserve
said risks to the outlook for the U.S. economy and job market had eased since last
fall, but it said it would keep buying $85 billion in bonds per month given the
still-high level of unemployment.
Dollar Soars, Assets Hit on Fed's Assessment – Marc
to Market
The Fed statement
noted that the downside risks have diminished since the fall when it more than
doubled the size of the its asset purchases. This coupled with Bernanke's
comment that tapering is possible later this year with QE ending purchases
around the middle of next year.
19-JUNE (AFTER, 18:40 GMT)
FOMC Statement: First Reaction – Tim
Duy’s Fed Watch
Redacted Version of the June 2013 FOMC
Statement – The
Aleph blog
Digging Through The Fed's Improving Forecast – ZH
Fed Expects Faster Growth, Lower Unemployment
Next Year – WSJ
The Federal Reserve
projects that the unemployment rate could fall to 6.5% in 2014, a threshold it
has conditionally set to begin raising interest rates.
Parsing the Fed: How the Statement Changed – WSJ
FOMC Projections and Press Conference – Calculated
Risk
19-JUNE (BEFORE, 16:45 GMT)
Fed Press Conferences, by the Numbers – WSJ
Bernanke will step up
to the microphones Wednesday for his tenth press conference. The press
conferences, since they debuted in April 2011, can have a substantial influence
on markets.
Fed Should Undo Twist Before Taper – WSJ
Return of Drunk Bernanke – Wonkblog
/ WP
What the Fed chairman
might want to say, but probably won't
"Fed In A Box" - Vince Reinhart's
FOMC Probability Matrix – ZH
19-JUNE (BEFORE, 14:30 GMT)
What to Expect From Fed Today – WSJ
The Fed’s policy
committee wraps up its latest conclave today and Bernanke's challenge in clear:
Lay the groundwork for pulling QE3 back without alarming the markets.
Why low inflation may not prevent the Fed from
reducing QE – MacroScope
/ Reuters
The low level of
headline inflation largely reflects the drop back in commodity prices over the
past 12 months, with even the low core rate partly explained by the indirect
impact of those lower commodity prices. Under those circumstances, we wouldn’t
expect the Fed to put too much weight on inflation being below its target.
FOMC Scenarios And What's Priced In – ZH
BofAML: 1) good news
taper: markets should be able to transition from Fed-led liquidity support to a
better growth-led recovery story, 2) the bad news taper: tapering seen as
premature is likely to spur risk-off behavior, 3) not-so-timely technical taper:
Fed is discussing tapering because it actually has a lower threshold than
indicated, perhaps for some technical reason.
19-JUNE (BEFORE, 13:00 GMT)
FOMC Decision Preview
– PragCap
Danske Daily – Danske
Bank (pdf)
FOMC meeting likely to once again
stress that QE tapering is not a tightening of monetary policy but rather a
reduction in monetary easing and that QE tapering will not imply that the Fed
has moved the timing of its first rate hike closer
3 Numbers to Watch: UK BOE minutes, US Fed statement & forecast – TradingFloor
The Bank of England releases minutes from the latest
monetary policy committee meeting, followed in the US
with the Fed's FOMC statement and new economic projections.
Market Preview: FOMC
meeting in spotlight – TradingFloor
European markets are likely to open lower on Wednesday. The
much awaited FOMC meeting takes centre stage today and traders will be looking
for hints on the potential timing of the scaling back of QE3.
Aamukatsaus – Nordea
Fedin
kiristykset: Vasta syssymmällä * Norjan keskuspankki voi yllättää * Markkinat
hermostuneita Fedin kokouksen alla
It’s FOMC day as we
all try to read the taper – TradingFloor
Today sees one of the most critical and highly anticipated
FOMC days in a long time as we are in the midst of the pivot from an ever accommodative
Fed to anticipating a more restrictive one. The only high probability outcome
is high volatility.
Marking Time Ahead of the Fed – Marc
to Market
There are three parts to the Fed story today: the FOMC
statement, the forecasts and Bernanke's press conference. The statement itself
is likely to be the least important…The Fed's forecasts are important…In his
prepared remarks, we expect the Chairman to help investors differentiate
between tapering and tightening and to try to drive home the point that current
conditions are not sufficient to slow down the long-term asset purchases ($85
bln a month).
Morning MoneyBeat: Fed Meeting Has That DéjÃ
Vu Feel to It – WSJ
This week’s rally ahead of the Fed announcement has a
familiar feel to it…But if history is an indication, investors shouldn’t get too
comfortable just yet.
18-JUNE
Bernanke's done,
Obama kinda sorta says – Wonkblog
/ WP
The countdown may have officially begun for Federal Reserve
Chairman Ben S. Bernanke.
The Tapering Talk and
Rising Yields Are a Sign of Recovery – EconoMonitor
For (Bernanke) to even consider tapering implies he believes
a solid recovery may be finally taking hold. But, by his own admission, a solid
recovery means higher interest rates.
Bernanke: mission accomplished – Free
exchange / The Economist
When Mr Bernanke speaks to the press tomorrow after the
release of the Fed's latest policy statement and economic projections, his task
will be to explain why those other factors justify the probable reduction in
asset-purchases by late this year, despite the fact that the Fed remains well
short of the programme's stated goals.
The chairman’s
challenge – MacroScope
/ Reuters
Bernanke says ‘taper,’ markets hear ‘tighten’
FOMC preview: QE
tapering? Not yet – TradingFloor
Mads Koefoed: We expect the FOMC to recognise some
improvement in the data, but clarify that it is not enough to begin tapering QE
just yet.
FOMC Decision -
"Real Fundamentals" Or "Reaction Function" – ZH
As asset-gatherers bluster about the fact that the Fed can't
leave now because things are not that great (correctly) they are perhaps
missing the key point that the Fed has changed its reaction function from fundamentals
to technicals - and is worried...
17-JUNE
Housing, Inflation
and Fed, Oh My! – WSJ
For most investors, the two-day Fed policy meeting is this
week's main event. Policymakers have said future decisions will be data-driven,
and this week brings new readings on factory activity, housing and inflation.
FOMC Projections
Preview: Disinflation Watch – Calculated
Risk
I expect no change to policy at this meeting, but a slight
downgrade to the economic projections - and some concern about inflation (but
probably not enough to increase the size of QE3 purchases).
FX Comment: taper…or
holiday? – Nordea
Bernanke almost has no choice here but to act dove on June
19th FOMC meeting – or else, none of us can peacefully go on summer holiday…
You know the worry is on high level when you hear IMF prompting to keep up the
QE in large for now while continuing preparation to exit “smoothly”.
Will Fed Bring a
Breather From Yen’s Roller-Coaster Ride? – WSJ
f the FOMC meet adds momentum to talk of a quantitative
easing exit or fails to clarify its position, that will likely push the dollar
even further down against the yen, putting traders on another lap of their
roller-coaster ride.
Chart that seems to
violate key principles of money creation – Sober
Look
A clear divergence in trends of the total loans and leases
on US banks' balance sheets and the broad money supply measure (M2). Loan
balance growth is slowing, while the money supply keeps growing at a steady
rate of around 7%.
6 Weeks Of
Hawkishness And 4 Dovish Expectations For This Week's FOMC – ZH
Goldman Sachs: While we do not expect the committee to
deviate much from the existing message and keep all options open, we anticipate
that Fed officials will, on the margin, try to calm markets at the June 18-19
FOMC meeting.
Prisoner's Dilemma:
Will Investors And The Fed Collaborate? – ZH
Citi's credit team: 'widening' in credit spreads but is just
as useful in considering the weakness in equity markets since the capital
structure arbitrage-led relationship between equity and credit as liabilities
on the balance sheet of a 'firm' means that any disconnect cannot last long.
FOMC preview – Danske
Bank (pdf)
Once again Bernanke faces a communication challenge
Fed heading for exit:
stand clear of the closing doors – Nordea
(pdf)
Or the summary here.
Watch What Fed Says,
Not What It Does – WSJ
At this week's Fed monetary policy meeting, it comes down
more to what officials will say, than what they'll do.
The Fed’s Tapering
Trial Balloon – WSJ
“It may be that policymakers wanted to ‘test the waters,’
determine the pervasiveness and ultimately force the shake out of some carry
trades,” BCA Research wrote in a report.
Why the Fed’s
‘Tapering’ Matters So Much – WSJ
Ahead of the Fed’s two-day meeting, beginning tomorrow,
here’s a look at what has happened in the markets since Bernanke said on May 22
that the Fed could start pulling back its bond buying sometime within the next
few meetings.
FOMC Meeting Begins
Tomorrow – Tim
Duy’s Fed Watch
This FOMC meeting is about the Fed regaining - or further
losing - control over its communication strategy. Bernanke will attempt to detail how exactly
the data flow is supportive of scaling back asset purchases in the next few
months (I believe the Fed prefers September) while at the same time disassociating
asset purchases from interest rate policy.
Taper talk persists
despite missed jobs, inflation targets – MacroScope
/ Reuters
So, either policymakers see brighter skies ahead or they
want to get out of QE3 for other reasons they may rather not air too publicly:
worries about efficacy or possible financial market bubbles.
FT Joins The Fray:
"Fed Likely To Signal Tapering Move" – ZH
Ben Bernanke is likely to signal that the US Federal Reserve
is close to tapering down its $85bn-a-month in asset purchases when he holds a
press conference on Wednesday, but balance that by saying subsequent moves
depend on what happens to the economy.
What The Fed Is
Looking At – ZH
From an economics perspective it was just a matter of time
before conditions began to break down; gains in equity indexes to record highs
amid sluggish economic performance were simply unsustainable.
JPMorgan: "Fed
Stimulus Inflated Prices....Removal Could Create Tail Event" – ZH
Then: Risk-On/Risk-Off: Ironically, positive data caused
equities and bonds to trade lower on increased probability of tapering (good
data were bad for stocks)….Now: the "Fed Regime": ecent bouts of positive
correlation of equities, bonds and commodities, suggest that the Fed’s stimulus
inflated prices of a broad range of financial assets, and removal of the
stimulus could create a tail event in which prices of all assets could go down.
What the Fed tapering
debate and Justin Bieber obsession has in common – Wonkblog
/ WP
If the economy evolves as expected, has the Fed become any
more or less inclined to maintain its easy money policies than it was a few
months ago? I am reasonably confident that the answer to that is no, and that
the volatility we’ve seen in markets around the tapering debate is not grounded
in something real.
16-JUNE
IMF ARTICLE IV
CONSULTATION
The IMF lowered its 2014 growth outlook and suggested that
the Fed should continue its $85 billion a month bond buying until at least the
end of 2013 and repeal government spending cuts.
Concluding Statement – IMF
Video: Press Conference on Consultation – IMF
Transcript of a Press Conference – IMF
IMF Sees Fed QE Through 2013, Warns of Exit Plan Challenges
– BB
U.S.
Stocks Fall on IMF Outlook, Warning on Stimulus Exit – BB
IMF urges repeal of 'ill-designed' U.S.
cuts – Reuters
IMF Urges Repeal of 'Ill-Designed' Spending Cuts – Economist’s
View
IMF Article IV on the US
– Econbrowser
I.M.F. Urges Washington
to Repeal ‘Ill-Designed’ Spending Cuts – NYT
IMF to Congress: No, seriously, guys, stop it – Wonkblog
/ WP
IMF Wades Into Fed Exit Debate, Urges No Change Through 2013
– WSJ
IMF: It Ain’t Over Till The Fat Lady Sings – ZH
Against Stupidity, The IMF Itself Contends In Vain – Krugman
/ NYT
The Biggest Economic
Mystery of 2013: What's Up With Inflation? – The
Atlantic
Despite QE3, core inflation just hit a 50-year low
Asset purchases
tapered in June? – Handelsbanken
(pdf)
We expect the FOMC to taper asset purchases either at the
June or September meeting. In our view, the FOMC at its June meeting will
either taper asset purchasing or explicitly signal (in its post-meeting
statement, for example) that a reduction in the pace of asset purchases is
coming soon.
Goldman FOMC Preview:
"Calming the Market" – Calculated
Risk
The Fed Is
Tightening, Whether or Not It Wants To – View
/ BB
Is the Fed Going to
Dial Down Its QE Taper Talk? – naked
capitalism
The Fed and emerging
markets: The end of the affair – The
Economist
Five Stages of Fed
Tapering – WSJ
15-JUNE
Weekly Preview – BNY
Mellon
Noted Fed watcher, Jon Hilsenrath is not alone in feeling that
Ben Bernanke may look to reassure over the Fed’s measured approach to policy
tightening.
Weekly Focus – Danske
Bank (pdf)
US: The Fed meeting gives Ben Bernanke an opportunity to
guide market expectations. Markit PMI will provide new data on the extent of
the soft patch. Euro area: main release next week is flash PMIs for June. We
expect improvements in both service and manufacturing PMIs. China:
There have recently been conflicting signals from PMIs, so the flash estimate
for HSBC manufacturing PMI for June is key to watch.
Weighing the Week Ahead: Will the Fed Change Course? – A
Dash of Insight
Yield Forecast Update: Volatility is back – Danske
Bank (pdf)
Discussions about the Fed scaling down asset purchases later
in the year have fuelled a sell-off in the core bond markets and led to a rise
in volatility over the past month. European markets have not been shielded from
the increase in rates, despite a weak economic outlook and despite the ECB
keeping its options open for further easing.
Week Ahead: 15-21
June 2013 – Nordea
(pdf)
US:
The FOMC meeting is coming up next week and recent article by Jon Hilsenrath
suggests markets may have gone ahead of themselves in recent rates sell-off.
Euro area: PMIs from Germany,
France and the
Euro zone is on the agenda, with ZEW as an appetizer.
14-JUNE
The Fed is still keen
to be investors’ best friend – The
A-List / FT
Mohamed El-Erian: Markets rallied sharply late on Thursday
on unconfirmed indications that the Fed may push back more forcefully on
investors’ fear of a pre-mature tightening in monetary policy. To sustain the
change in market sentiment for more than a few days, the Fed would need to
follow up with greater details
Fed Likely to Push
Back on Market Expectations of Rate Increase – WSJ
An adjustment in the program won’t mean that it will end all
at once, officials say, and even more importantly it won’t mean that the Fed is
anywhere near raising short-term interest rates. Investors aren’t listening.
Is the Fed Going to
Dial Down Its QE Taper Talk? – naked
capitalism
The Fed has a difficult task ahead - TradingFloor
Nick Beecroft: The Federal Reserve has embarked on an
ambitious journey, during which they intend to simultaneously burst bubbles,
avoid a bond market rout, and boost lending to consumers and businesses. This
may prove to be an enormously difficult task.
US Bonds In
"Panic" Mode – ZH
Based on Credit-Suisse's Panic-Euphoria model of risk
appetite, US
bond markets are on the verge of the short-term capitulative "Panic"
mode. Each time we have reached this level of 'selling' in the last 6 years, Treasury
yields have compressed significantly.
13-JUNE
Two For Tapering
– Tim
Duy’s Fed Watch
Today's data appears consistent with Fed expectations that
they can begin tapering asset purchases this year. Still a horse race between September and
December, although I think the Fed is aiming for the earlier date if data
allows.
12-JUNE
Yellen overwhelming
favorite to replace Bernanke at Fed: Reuters poll – Reuters
Yellen likely to
replace Bernanke at Fed – MacroScope
/ Reuters
Fed Tapering: Asset
Class Sensitivity – The Big Picture
11-JUNE
The futures market
implies the Fed "taper" to end by early 2015 – Sober
Look
10-JUNE
Fed’s Bullard: Weak
Inflation May Argue For More Stimulus – WSJ
Bullard Holds His
Ground – Tim
Duy’s Fed Watch
Bullard remains focused on inflation. If his
colleagues were to join him, they would stop pointing us toward cutting asset
purchases in the next few months.
The third rail – Free
exchange / The Economist
The thrust of Mr Bullard's argument here is pretty straightforward.
The Fed is seeking (ostensibly) to maximise employment subject to an inflation
constraint. If the inflation constraint looks less binding, then whatever
policies were previously being used in pursuit of maximum employment should be
deployed more aggressively
9-JUNE
How did we get here?
A "map" of the Fed's balance sheet's history – Sober
Look
People have trouble distinguishing between the liquidity
facilities provided by the central bank and the various monetary expansion
activities.
Fed's Plosser says
jobs report another reason to trim QE3 – Reuters
The latest jobs report on Friday showed that government
spending cuts have so far not been as damaging as some feared, Philadelphia Fed
President Charles Plosser said, adding it only entrenched his opinion that the
Federal Reserve should reduce its bond buying "now".
How Will the Fed Trim
Bond Purchases? – WSJ
Why the Fed Hates the
Word ‘Tapering’ – WSJ
BofAML: The Good,
Bad, And Ugly "Taper" Scenarios – ZH
4-JUNE
More Tapering Talk
– Tim
Duy’s Fed Watch
Fed is looking to pull back on asset purchases. They expect the data to give them room to do
so.
Let 'er rip, Mr
Bernanke – Free
exchange / The Economist
Better American fundamentals should make monetary policy
more effective and give the Fed more room to ease, but the Fed instead seems to
want to use them as an excuse to tighten (or to passively accept tightening).
That's not good.
3-JUNE
On September – Tim
Duy’s Fed Watch
As always, the data will drive the Fed's next move. My expectation is that data evolves in such a
way that policy will shift in September.
I think there is currently a bias toward ending QE, so I anticipate a
willingness of policymakers to focus on stronger numbers and downplay the
importance of weaker numbers.
Why The Fed’s Not
Tightening Any Time Soon – PragCap
Fed’s Williams Open
to Trimming Bond Purchases – WSJ
He is open to cutting the central bank's bond-buying program
over coming months, as long as the economy continues to make good progress.
Fed’s Lockhart:
Nearing Time to Trim Bond Purchases – WSJ
The Fed is nearing the day where it can consider reducing
the size of its bond-buying stimulus effort, but even when that happens,
smaller-sized purchases are unlikely to be the major shift in policy some think
them to be, a veteran U.S. central bank official said.
2-JUNE
If or when the Fed starts to
taper, where will the pain land first? Barclays analysts Guillermo Felices,
Michael Gapen and Sreekala Kochugovindan have taken a shot at answering that
question expecting the Fed to start backing itself out at the start of 2014
That all the increase in risk
assets has been on the back of multiple expansion for the past year is by now
not news to anyone. What may come as a surprise to some who have not been
paying attention, as Morgan Stanley conveniently reminds us, is that corporate
profits have been declining not for one or two quarters, but for two full years
now.
Rosengren’s comments signal
yet another way the Fed could tailor its bond purchases to the economy and do
more with less. Maybe not only is tapering not the same as tightening, but
tapering could eventually lead to more easing.
Fed Not Constrained Amid Tame Inflation – WSJ
Inflation is getting
tamer, a development that will surely fuel the debate over the Federal
Reserve's bond-buying.