With all eyes fixed on any mention of the length of time post-taper before rate hikes, stocks and bonds slid gently in the last few minutes before the minutes release – and sure enough…
- *SEVERAL FED OFFICIALS SAID FORECASTS OVERSTATED RATE RISE PACE
In other words, we are way more dovish than you thought we were… Weather was blamed for any slowdown and the pace of tapering appears set. Bear in mind these minutes reflect a discussion that took place – at least from a chronological standpoint – before Janet Yellen’s “six months” statement.
Pre-FOMC: S&P Futs 1852.75, 10Y 2.717%, Gold $1304
Here is the key fragment:
A few participants suggested that new language along these lines could instead be introduced when the first increase in the federal funds rate had drawn closer or after the Committee had further discussed the reasons for anticipating a relatively low federal funds rate during the period of policy firming. A number of participants noted the overall upward shift since December in participants’ projections of the federal funds rate included in the March SEP, with some expressing concern that this component of the SEP could be misconstrued as indicating a move by the Committee to a less accommodative reaction function. However, several participants noted that the increase in the median projection overstated the shift in the projections. In addition, a number of participants observed that an upward shift was arguably warranted by the improvement in participants’ outlooks for the labor market since December and therefore need not be viewed as signifying a less accommodative reaction function. Most participants favored providing an explicit indication in the statement that the new forward guidance, taken as a whole, did not imply a change in the Committee’s policy intentions, on the grounds that such an indication could help forestall misinterpretation of the new forward guidance.
So is “several” less than or more than 6 months? Of course, these are Fed forecasts. Which are always wrong anyway. Either way, stocks love it as the Fed has just given the go ahead to reflate the bubble some more.
FOMC Minutes April 2014
1. If the private sector has added more than 129,000 payroll jobs in March, the U.S. will be back to its peak level of private-sector employment.
2. The average workweek slipped by 0.1 hour to 34.2 hours in February, the lowest level since January 2011, but if there is even just a partial reversal of the weather distortion it should be enough to generate a rebound in the average
3. Watch the number of full-time jobs created, this is a key concern of Janet Yellen and the FOMC.
4. Average hourly earnings for all employees rose 0.4% in February, matching the strongest gain in more than two and a half years; if the gains continue in March it will reinforce the impression of a generally tightening labor market
5. The labor force participation rate, another key concern of Yellen and the Fed. Greater labor-force participation will be very welcome.
18 February 2014 - 11:31 am
The surprise in the Bank of Japan’s policy update today was the extent to which it will attempt to stimulate the economy with special lending facilities.
The BoJ said it will “double the scale” of two loan schemes that were set to expire. The facilities enable financial institutions to borrow funds at a fixed rate of just 0.1 per cent for four years.
Details below, but here’s the key quote on the intended impact:
The Bank expects that these enhancements will further promote financial institutions’ actions as well as stimulate firms’ and households’ demand for credit, with a view to encouraging banks’ lending and strengthening the foundations for economic growth.
The success of the loan schemes has been underwhelming so far. Even with real interest rates in negative territory because of the rise in inflation, demand for credit among companies and households is not responding as the BoJ had hoped.
But the significance might not be the details, but merely that the BoJ has just proven it’s willing to amend its policy to help the economy. >> Read More
11 February 2014 - 19:05 pm
- *YELLEN SAYS FOMC LIKELY TO CONTINUE QE TAPER IN MEASURED STEPS
- *YELLEN SAYS RECOVERY IN LABOR MARKET IS `FAR FROM COMPLETE’
- *YELLEN SAY FED TO `CONTINUE TO MONITOR FOR EMERGING RISKS’
- *YELLEN: MAIN RATE LIKELY TO BE LOW WELL PAST 6.5% JOBLESS RATE
Of course, the Q&A (and hawkish follow-up panel) may well be the “common knowledge” setting moment for today but for now, the Taper is on and forward-guidance
Yellen Speech Feb 11
21 January 2014 - 22:40 pm
Hold your breath shareholders! Tamilnad Mercantile Bank (TMB) has declared an interim dividend of 9,000 per cent. Yes, you read it right.
That’s actually Rs 900 per share of Rs 10 each, for the fiscal ending March 2014.
The board of this Tuticorin-headquartered bank took a decision to this effect at a meeting held on January 18.
Bank sources said this would translate into an outgo of Rs 25.6 crore (unchanged from last year).
Highest in the sector >> Read More
05 January 2014 - 17:22 pm
India Inc raised USD 51.8 billion in debt during 2013 through primary bond sales, 19.5 per cent down from the record USD 64.3 billion in the previous year.
The offshore US dollar-denominated bond sale by domestic companies touched a record USD 12 billion, up 47 per cent after surpassing last year’s record annual volume of USD 8.1 billion, according to a report.
According to investment bankers, the overall international debt raising (including non-USD raising) by domestic firms touched a new high of USD 15.8 billion, up from USD 10 billion the preceding calendar year.
Telecom major Bharti Airtel led the pack, raising USD 2.25 billion in overseas bonds, followed by Reliance (USD 800 million in a perpetual bond sale), ICICI Bank (close to a USD 1 billion in multiple currencies), SBI (USD 750 million), Exim Bank over USD 1 billion in multiple currencies, HDFC (USD 500 million).
Debts raised during the October-December quarter touched USD 11.1 billion, a jump of 147.6 per cent on sequential basis from the third quarter, but down 32.6 per cent from the year-ago period, as per Thomson Reuters report.
According to fee estimates by Thomson Reuters, i-bankers raked in USD 98.1 million in fees in the year, which is a 22.2 per cent decline from the previous year. >> Read More
18 December 2013 - 18:25 pm
It’s Fed day today. The FOMC will announce its next policy decision at 2 PM ET.
But besides that there are a few other odds and ends happening.
• 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
• At 8:30 AM, the Census Bureau will release Housing Starts for September, October and November. Total housing starts were at 891 thousand (SAAR) in August. Single family starts were at 628 thousand SAAR in August. The consensus is for total housing starts to increase to 952 thousand (SAAR) in November.
• During the day: The AIA’s Architecture Billings Index for November (a leading indicator for commercial real estate).
18 December 2013 - 5:41 am
Whatever It Takes
A few observations on what to look for in the language of the FOMC announcement tomorrow from a game theoretic perspective…
Ever since Mario Draghi ad-libbed the lines “whatever it takes” in his July 2012 speech in London, a speech that together with the equally fabulistic OMT program rescued Europe and the Euro from the clutches of Spanish and Italian sovereign debt woes, this has been the go-to phrase for any politician or central banker seeking to imply unlimited resolve in bringing the firepower of the State down on an unruly market. Angela Merkel and Nicolas Sarkozy immediately seized on Draghi’s line once they saw what a salutary influence it had … Barack Obama now uses the phrase in the context of everything from budget fights to immigration reform to community college funding … Ben Bernanke is much more reticent to use the phrase directly (he’s smart enough to see it as the psychological weapon that it is, a weapon that diminishes from overuse), but his words are constantly interpreted by the media as implying a “whatever it takes” stance. In fact, I’m hard-pressed to come up with a more prevalent — or powerful — policy language meme than “whatever it takes.”
Why is it so popular? Because it works like a charm in the Common Knowledge game. Underpinning the CK game is a vast array of forward looking expected utility calculations that each and every one of us makes regarding our expectation of everyone else’s expectations of everyone else’s expectations. I know that’s a mouthful, and for some background on the mechanics of the CK game and Fed communications you can look here and here and here in prior Epsilon Theory notes, but essentially you’re playing what Keynes called the Newspaper Beauty Contest. The drivers of the CK game are public statements by famous people like Mario Draghi, and the expected utility calculations we unconsciously make in our heads are based on Who and What … Who is making the statement and how likely is it that he or she will deliver on the statement, and What is the likely impact of the policy if it comes to pass. >> Read More