Are we finally going to see the interest rate cycle reverse?

[Sour Mash]

Like many here I follow a load of 'alternative' financial blogs/ websites/ podcasts and a theme I see emerging is the likelihood of a reversing of the rate cycle towards rising rates 'soon'.

 

Having had years of ZIRP/ Financial Repression/ Money printing is there a realistic chance of a policy change with the CBs or is it (more likely IMO) that they will keep the printing up for as long as they possibly can?

[TheCountOfNowhere]

#ComedyGold

[iamnumerate]

Not while Mark Carney is in charge.

[Si1]

51 minutes ago, iamnumerate said:

Not while Mark Carney is in charge.

But he's being vigilant

[LondonBound]

Since QE began we have come accustomed to believe that the central banks are all powerful, having sole power over interest rates. We have forgotten that once upon a time it was the bond/currency markets who called most of the shots. Remember 16th Sept. 1992 aka Black Friday? Now QE is over (and trust me it is!), the markets are going to start calling the shots again and that means higher rates in the US and hence worldwide. 

Forget Yellen, Carney and Draghi. The 30yr bond bull market is finished. 

[interestrateripoff]

Higher rates will trigger a debt crisis bigger than 1982. That was the turning point which triggered rates downwards. Rebalancing this mess will be incredibly hard risking social unrest.

[Will!]

2 hours ago, LondonBound said:

Now QE is over (and trust me it is!)

Who says QE is over in the UK?  Mark Carney's action after the Brexit vote strongly suggests it isn't.

[the_duke_of_hazzard]

Additionally, Trump said that because of record low interest rates from the Fed, the country's economy is "in a big, fat, ugly bubble," with debt increasing while the "only thing that looks good is the stock market."

 

http://uk.businessinsider.com/we-are-in-a-bubble-trump-debate-attacks-federal-reserve-chair-yellen-2016-9

[darkmarket]

Yes! But only because the markets are forcing it on them.

"HSBC scraps market-leading mortgages as rates start to rise

The lender is the first to make significant changes to multiple deals, but experts say rates have reached their lowest point and are now likely to rise across the board. 

This is because swap rates, which determine the cost of borrowing by lenders, have been rising and have almost doubled since June."

http://www.telegraph.co.uk/personal-banking/mortgages/hsbc-scraps-market-leading-mortgages-rates-start-rise/

Almost worth a thread of its own but here suits well.

[LondonBound]

11 hours ago, Will! said:

Who says QE is over in the UK?  Mark Carney's action after the Brexit vote strongly suggests it isn't.

QE = BofE expanding its balance sheet to manipulate rates/boost money supply.  That policy is done. It only remains how they (if ever) shrink the balance sheet again   

Cutting the base rate is not QE. 

[Funn3r]

Surely it would be surprising if the Fed did not raise rates this month? That would mean two rate rises in a row, albeit pathetically small and with a year in between. To me that shows the "direction of travel". The UK historically follows, eventually. 

So not like it's a done deal and off we go, but it does kind of smell right.

[winkie]

All the pumping up of the assets bubble has caused it to keep getting bigger, carry on and the stretched skin will eventually pop, so for relief some gas at some point soon will have to be allowed out to avoid a cataclysmic event.

[dougless]

4 minutes ago, winkie said:

All the pumping up of the assets bubble has caused it to keep getting bigger, carry on and the stretched skin will eventually pop, so for relief some gas at some point soon will have to be allowed out to avoid a cataclysmic event.

I do like this analogy.

 

[Blod]

Though there is evidence that we're seeing the rate trend beginning to reverse it might take years for that to happen. Carney isn't leaving till after we leave the EU in 2019. The next Fed meeting will see another rise. Yellan has it priced into the markets already. Theoretically they could make it smaller than twenty five points but I doubt it. 

The real question is when will the next one be. With Trump's comments I could see another rise in the summer assuming things hold together that long.

Edited December 9, 2016 by Blod

[TheCountOfNowhere]

12 hours ago, darkmarket said:

Yes! But only because the markets are forcing it on them.

"HSBC scraps market-leading mortgages as rates start to rise

The lender is the first to make significant changes to multiple deals, but experts say rates have reached their lowest point and are now likely to rise across the board. 

This is because swap rates, which determine the cost of borrowing by lenders, have been rising and have almost doubled since June."

http://www.telegraph.co.uk/personal-banking/mortgages/hsbc-scraps-market-leading-mortgages-rates-start-rise/

Almost worth a thread of its own but here suits well.

Already started to happen in the US.

 

As we saw between 2008 and 2012 Interest rates and Mortgage rates are separate entities.

The BoE has forced down mortgage rates with their FLS free cash give away.

For me, this points to Carney and Osborne being the real drivers behind the current low mortgage rate sub-sub-prime bubble.

Osborne is gone. Carney is a dead duck now.

Collapse is imminent

 

 

[winkie]

1 hour ago, dougless said:

I do like this analogy.

 

Ta, I hope they take note.

[darkmarket]

7 hours ago, TheCountOfNowhere said:

As we saw between 2008 and 2012 Interest rates and Mortgage rates are separate entities.

Although they have different forces deciding them, they're not altogether separate. Things will probably move back to something like before when interbank lending rates were higher than today and the base rate was similarly low, but given the creeping inflation form external sources, of which the HSBC move is a good example, it's inevitable that at some point the BoE will be forced to move. They have to act to control inflation wherever it comes from, and at this rate it won't take long for that to be a more pressing issue than even the threat of a few hundred thousand more unemployed they're using to justify the low rate.

 

[dugsbody]

15 hours ago, LondonBound said:

QE = BofE expanding its balance sheet to manipulate rates/boost money supply.  That policy is done. It only remains how they (if ever) shrink the balance sheet again   

Where are you getting this information from? Is this opinion or are you basing it on something tangible? The ECB has just extended its QE programme. I'm interested in what makes you think the BoE is "done"?

 

[zugzwang]

25 minutes ago, dugsbody said:

Where are you getting this information from? Is this opinion or are you basing it on something tangible? The ECB has just extended its QE programme. I'm interested in what makes you think the BoE is "done"?

 

There's a sizeable energy shock on the way next year thanks to the pound's dramatic fall and a resurgence in the price of oil. I'd suggest it's unlikely that Carney will risk compounding that shock by pushing more QE into the banking system. Not in the immediate future, and not unless he desperately has to. The acute crisis in the Italian banking system is the thing that's forced Draghi's hand. It looks like a desperate measure.

[LondonBound]

8 hours ago, dugsbody said:

Where are you getting this information from? Is this opinion or are you basing it on something tangible? The ECB has just extended its QE programme. I'm interested in what makes you think the BoE is "done"?

 

Firstly just because the ECB extends their programme does not mean we have to extend ours. They have their problems and we have ours. Why do you think the programmes are connected?

Secondly QE was introduced to boost GDP growth and fight the risk of deflation. GDP is now sustainably growing (notwithstanding brexit shock) and the risk of deflation is now moving to inflation (GBP falling, rising energy prices and now rising China PPI etc). Why would you believe further QE is conceivable in such an environment?

QE is certainly (IMHO)"done".

I'll go further and say that I think it is probable that the BofE raises rates at least once in 2017 in order to defend its inflation fighting credibility. 

[Will!]

On 08/12/2016 at 7:23 AM, LondonBound said:

QE = BofE expanding its balance sheet to manipulate rates/boost money supply.  That policy is done. It only remains how they (if ever) shrink the balance sheet again   

Cutting the base rate is not QE. 

I was referring to the purchase of up to £10 billion of UK corporate bonds and an expansion of the asset purchase scheme for UK government bonds of £60 billion announced by the BoE on 4th August 2016.  QE doesn't look very 'done' to me.