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gruffydd

Interest Rates Heading Up? The Markets Think So...

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http://www.bloomberg.com/apps/news?pid=206...id=ambmpfpddUy0

“There was a spike in the number of people who think rates might have to be increased from this week versus last week,†said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages about $2 billion in San Antonio. “The market might be a little afraid of inflation creeping back in because of what the government has been pumping into the economy. Yellen making those comments was one more reason for the market to go back down.â€

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide

June 5 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said that policy makers need to be prepared for “substantial shocks†and that rising Treasury yields may be a “disconcerting†signal of inflation fears.

“Recent experience raises the possibility that the Great Moderation is behind us, so we must be prepared for substantial shocks,†Yellen said today during a panel discussion hosted by the Fed Board of Governors in Washington. “Great Moderation†is a term used to describe the comparative economic stability seen in the U.S. and other major industrial countries, except Japan, since the mid-1980s.

Edited by gruffydd

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http://www.marketwatch.com/story/spike-in-...f-whats-to-come

http://english.people.com.cn/90001/90778/9...64/6672211.html

http://www.guardian.co.uk/money/2009/jun/0...-interest-rates

Get ready for interest rates to rocket

Not everyone shares the green-shoots mania, investment fund managers included

It's one of the oddities about this recession. Why haven't more companies gone bust? Our banks are virtually all bankrupt. But corporate Britain seems in much better shape. Yes, Woolworth's is no longer. Vauxhall Motors teeters on the edge as its parent group, General Motors, goes into administration. But compare the FTSE250 this year with last year and the names (minus the foolhardy mortgage lenders) are nearly all the same.

Edited by gruffydd

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I'm still puzzled by this.

Somewhat out of the blue, on Wednesday Bernanke expresses concern about the US budget deficit.

Same day Kansas City Fed President Thomas Hoenig says interest rates should rise.

Today Janet Yellen (President, Fed Bank of San Francisco) expresses similar concerns and Dennis Lockhart (President, Fed Bank of Atlanta) says the Fed shouldn't wait too long to tighten monetary policy.

And today the yield on the 2-yr Treasury note rises a staggering 37 basis points. Yep, it rose from 0.95% to 1.32% in a single day.

What are we being groomed for here?

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Deflation was just a mirage.

Not sure I would agree with that... the credit and asset deflation was and is very real... the coming inflation is the b*****ers chosen next step... after all they would rather we lost the shirts off our backs...

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I'm still puzzled by this.

Somewhat out of the blue, on Wednesday Bernanke expresses concern about the US budget deficit.

Same day Kansas City Fed President Thomas Hoenig says interest rates should rise.

Today Janet Yellen (President, Fed Bank of San Francisco) expresses similar concerns and Dennis Lockhart (President, Fed Bank of Atlanta) says the Fed shouldn't wait too long to tighten monetary policy.

And today the yield on the 2-yr Treasury note rises a staggering 37 basis points. Yep, it rose from 0.95% to 1.32% in a single day.

What are we being groomed for here?

What do you think all this means? :unsure:

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I'm still puzzled by this.

Somewhat out of the blue, on Wednesday Bernanke expresses concern about the US budget deficit.

Same day Kansas City Fed President Thomas Hoenig says interest rates should rise.

Today Janet Yellen (President, Fed Bank of San Francisco) expresses similar concerns and Dennis Lockhart (President, Fed Bank of Atlanta) says the Fed shouldn't wait too long to tighten monetary policy.

And today the yield on the 2-yr Treasury note rises a staggering 37 basis points. Yep, it rose from 0.95% to 1.32% in a single day.

What are we being groomed for here?

Before Beeny Benny 'expressed concern', something odd happened to Fannie 4.5 30yr.

Major sell-off.

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What do you think all this means? :unsure:

I haven't got a clue, but one thing I do know is that these coordinated speeches and statements to the press by Fed officials happen for a reason. Either they're trying to calm fears by acting tough, or the ground is being prepared for something that's in the pipeline.

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Vauxhall is fine now it's just owned by Opel which in turn is 1/3 owned by magna and 1/3 by a russia van company.

In fact, all these years, Vauxhall has been running at a profit... it's opel that dragged GM Europe down.

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Vauxhall is fine now it's just owned by Opel which in turn is 1/3 owned by magna and 1/3 by a russia van company.

In fact, all these years, Vauxhall has been running at a profit... it's opel that dragged GM Europe down.

What??? Vauxhalls have been re-badged Opels for 30+ years.

There isn't a single market outside the UK where you can buy a Vauxhall.

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Vauxhall is fine now it's just owned by Opel which in turn is 1/3 owned by magna and 1/3 by a russia van company.

In fact, all these years, Vauxhall has been running at a profit... it's opel that dragged GM Europe down.

how is vauxhall fine they have just been bought ? wait and see if there is going to be any cutbacks its guaranteed it will be in the uk as its more expensive here, and our employment laws make it easier for companies to get rid of people here than it does in germany so if they want to streamline the company it will be the vauxhall side that gets hit not opel they will just build the cars in germany stick a vauxhall badge on and ship them in

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I haven't got a clue, but one thing I do know is that these coordinated speeches and statements to the press by Fed officials happen for a reason. Either they're trying to calm fears by acting tough, or the ground is being prepared for something that's in the pipeline.

Modest rate rise to prevent a sudden dislocation?

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I'm still puzzled by this.

Somewhat out of the blue, on Wednesday Bernanke expresses concern about the US budget deficit.

Same day Kansas City Fed President Thomas Hoenig says interest rates should rise.

Today Janet Yellen (President, Fed Bank of San Francisco) expresses similar concerns and Dennis Lockhart (President, Fed Bank of Atlanta) says the Fed shouldn't wait too long to tighten monetary policy.

And today the yield on the 2-yr Treasury note rises a staggering 37 basis points. Yep, it rose from 0.95% to 1.32% in a single day.

What are we being groomed for here?

Ratings downgrade ?

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It seems to me the fed follows the 10 year bond market. The appearance is that the fed is the one who sets the rates.. but it seems sometimes looking at it that the market moves powerfully one way or the other and the fed follows.

If the fed is indeed losing control of the 10 year, and it continues to rise, it will be the central economic story of the coming months imo. Heck already I don't think people have grasped how big that 1% move up was, that will filter through into everything like mortgages.

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Modest rate rise to prevent a sudden dislocation?

Certainly the sharp moves in the Fed Funds Futures yesterday suggest traders believe the Fed will now lift rates before the year end.

Like you say, could be just a token rise to try and reassert the credibility of the Fed.

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The biggest problem the US faces is the housing market collapse over there.

Because US mortgage rates are in tradiational times fixed for the life of the mortgage i.e 25 years (I know they have been alt a crazy over the past 5 years but I think that has stopped now) You can translate this Fed speak as "We have lowered mortage rates to significantly below there long term average so please, please buy a house and to give you a kick start we are going to tell you we are going to raise rates when in reality we will not."

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And how does all this reflect on UK rates? Can we hope for a rate rise?

Seeing mortgage payments drop by huge amounts kind of makes me want to......... PUKE.

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And how does all this reflect on UK rates? Can we hope for a rate rise?

Seeing mortgage payments drop by huge amounts kind of makes me want to......... PUKE.

If the Fed do raise rates to reconnect the dots then it follows that the UK will have to follow suit (or have the BOE buy evry gilt that comes on the market). Which institution (outside the UK) would buy UK gilts at less yield than Treasuries? Anybody feel I have got this wrong?

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Deflation was just a mirage.

it is still here and will be here for some time yet. Paper oil has double in price whereas oil being stored on tankers has increased by 71% since April, as an example.

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If the Fed do raise rates to reconnect the dots then it follows that the UK will have to follow suit (or have the BOE buy evry gilt that comes on the market). Which institution (outside the UK) would buy UK gilts at less yield than Treasuries? Anybody feel I have got this wrong?

The Fed (and the BoE) have boxed themselves into a perverse situation. Remeber that QE was instead of dropping rates further thus it makes sense that they will reverse QE before they raise rates, but that QE is actually propping up companies, which will fail without it. So the conundrum is reverse QE abd cause the to-big-to-fail companies to go bust or go straight for raising rates which will put massive pressure on both non-QE company and household balance sheets.

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It seems to me the fed follows the 10 year bond market. The appearance is that the fed is the one who sets the rates.. but it seems sometimes looking at it that the market moves powerfully one way or the other and the fed follows.

If the fed is indeed losing control of the 10 year, and it continues to rise, it will be the central economic story of the coming months imo. Heck already I don't think people have grasped how big that 1% move up was, that will filter through into everything like mortgages.

With base rates at virtually zero a 1% increase is huge in percentage terms.

The debt drag effect on the economy will be horrific.

I wonder what the next quick fix will be?

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The deflation verses inflation debate has got me wondering for sometime as we appear to have both. Asset and wage deflation and price inflation, which is of course the worst possible combination. They each need the opposite economic treatements, low rates and QE to treat the deflation and high interest rates to treat the inflation...

Is it possible to have QE and high interest rates at the sametime? I cannot think of any reason why not, but I am not an expert on the financial markets.

Could, for example, the BoE extend its' QE to include corporate bonds to support those 'too big to fail' companies whilst pushing up interest rate to curb prices. Of course they could just wait for unemployment to rise to do the job for them...

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The deflation verses inflation debate has got me wondering for sometime as we appear to have both. Asset and wage deflation and price inflation, which is of course the worst possible combination. They each need the opposite economic treatements, low rates and QE to treat the deflation and high interest rates to treat the inflation...

Is it possible to have QE and high interest rates at the sametime? I cannot think of any reason why not, but I am not an expert on the financial markets.

Could, for example, the BoE extend its' QE to include corporate bonds to support those 'too big to fail' companies whilst pushing up interest rate to curb prices. Of course they could just wait for unemployment to rise to do the job for them...

Absolutely yes. The the obvious situation being hyper inflation. Interest rates would just be higher and by definition because its hyper inflation the Government has clearly being press print too many times. of course, what really matters is "real" interest rates.

If real rates were high, then queasing could be used to lower them, though risking further inflation. If real rates were negative, then queasing would still work, as presumably the Government would agree to buy back bonds and probably investors would be keen to offload them.

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