Fed

The Secular Decline in Long-Term Yields around FOMC Meetings

is a fascinating paper from March 2020 from Sebastian Hillenbrand. Some amazing figures and results follow. Long-term U.S. Treasury yields fell by almost 8% between 1980 and 2017. I document thatthe entire decline in long-term interest rates was realized in a 3-day window around FOMCmeetings. I find a similar pattern for U.S. equities: the same […]

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Financial Stability Report May 2021

The Fed Financial Stability Report is out and of course the media tells us that the Fed warns of excessive asset prices. Well not so fast. First of all “Given the high level of uncertainty associated with the pandemic, assessing valuationpressures is particularly challenging, and asset prices remain vulnerable to significantdeclines should investor risk sentiment […]

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The collateral supply effect on central bank policy

Carolyn Sissoko has recently given a presentation named after a paper of hers. There is also a video available. In it she argues that the nature of today’s funding markets, which are predominantly based on repo-lending, are incredibly fragile and the implications are neither well understood nor properly researched. One of the central themes is […]

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How “Monetization” Really Works

Most likely you have heard now several times the inflationistas and fear mongers shout about “Printing Money” and “Debt Monetization” or “Fed Manipulation” and warn of Zimbabwe and hyperinflation. Oh, yes and the stock market performance since the financial crisis is all just manufactured by the Fed as well (nevermind that earnings per share have […]

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Accounting Gimmicks with Emergency Facilities

Nathan Tankus has a new post up What the Hell is Going On With CARES Act “Funds”? In it he explains why the funds reserved for the Fed emergency facilities, the withdrawals of which I have written before, are essentially only accounting gimmicks There is no money to be “reused”. It’s not a “payfor” to […]

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Tail Risks on the Horizon?

A quick follow up on my recent post: It looks like Steven Mnuchin really withdraws funding for a part of the lending facilities of the Federal Reserve. The FT has an excellent overview over all the facilities, their uptake and which ones will be suspended in December: The plumbing of the financial markets is still […]

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