Comments on: Fed Should Cut Rates Immediately http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html Freshly squeezed market commentary & analysis Tue, 16 Mar 2010 17:57:24 +0000 http://wordpress.org/?v=2.0.2 by: Bond Market & Fed Funds Rate Together Again, Finally http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-33224 Wed, 21 May 2008 23:29:03 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-33224 [...] It is like the reunion of two lovers (this is as romantic as a trading blog can get). These two financial metrics usually go hand in hand but for far too long there has been a historic dislocation between them. I first pointed this out last summer: Fed should cut rates immediately. [...] […] It is like the reunion of two lovers (this is as romantic as a trading blog can get). These two financial metrics usually go hand in hand but for far too long there has been a historic dislocation between them. I first pointed this out last summer: Fed should cut rates immediately. […]

]]> by: Federal Reserve Still Behind The Curve http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-32332 Wed, 19 Mar 2008 06:58:15 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-32332 [...] I’m referring to Bernanke’s insistence to remain, month after month, firmly behind the 3 month Treasury Bill rates. This is something that I noticed last summer, when I wrote that the Fed should cut rates immediately. [...] […] I’m referring to Bernanke’s insistence to remain, month after month, firmly behind the 3 month Treasury Bill rates. This is something that I noticed last summer, when I wrote that the Fed should cut rates immediately. […]

]]> by: Why Today’s Rate Cut Isn’t Enough http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-27461 Wed, 23 Jan 2008 01:54:01 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-27461 [...] I’ve been telling the Fed to cut rates since last summer so if you’re one of my 4 long term readers, this is not new to you. [...] […] I’ve been telling the Fed to cut rates since last summer so if you’re one of my 4 long term readers, this is not new to you. […]

]]> by: FOMC Rate Cut September 18th 2007 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-18386 Wed, 26 Sep 2007 00:12:00 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-18386 [...] Not because I’m talking my book, but rather because that’s what the bond market is saying. Right now the 90 T-Bill rate is around 4.05%. While the Fed Funds rate has been 5.25% since June 29, 2006, since this spring, the bond market has been signaling repeatedly that it should be lowered. [...] […] Not because I’m talking my book, but rather because that’s what the bond market is saying. Right now the 90 T-Bill rate is around 4.05%. While the Fed Funds rate has been 5.25% since June 29, 2006, since this spring, the bond market has been signaling repeatedly that it should be lowered. […]

]]> by: Bond Market Screaming For Rate Cut - Fed Listening? http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-14426 Wed, 22 Aug 2007 03:56:54 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-14426 [...] When I wrote that the Fed should cut rates immediately, some (including me and myself) thought I was nuts. Now it seems eerily prescient. I don’t take credit in either case. All I’m trying to do is read the market and listen to what its quiet whisper. bonds, bond market, discount rate, federal reserve, fed funds rate, fed rate, interest rate, risk free, T Bills, treasury bills [...] […] When I wrote that the Fed should cut rates immediately, some (including me and myself) thought I was nuts. Now it seems eerily prescient. I don’t take credit in either case. All I’m trying to do is read the market and listen to what its quiet whisper. bonds, bond market, discount rate, federal reserve, fed funds rate, fed rate, interest rate, risk free, T Bills, treasury bills […]

]]> by: Financial Liquidity Injection: Better Late Than Never http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-12007 Fri, 10 Aug 2007 22:00:05 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-12007 [...] By not acting fast enough, what happened was that the overnight lending rate actually shot higher than the benchmark rate. This kind of move is so extreme because you have to understand that the short term rates were significantly below the benchmark rates set by the Fed. So in essence we had a pseudo tightening of the Fed funds rate. Definitely the opposite of what the market has needed for a while and most definitely not what it needs in this stressful times. [...] […] By not acting fast enough, what happened was that the overnight lending rate actually shot higher than the benchmark rate. This kind of move is so extreme because you have to understand that the short term rates were significantly below the benchmark rates set by the Fed. So in essence we had a pseudo tightening of the Fed funds rate. Definitely the opposite of what the market has needed for a while and most definitely not what it needs in this stressful times. […]

]]> by: Hell Freezes Over, Pigs Fly & I Agree With Cramer http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10519 Fri, 03 Aug 2007 22:19:22 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10519 [...] Right now the market is screaming at the Fed to reduce rates. The bond market is on the precipice of a real liquidity crunch which could reverberate throughout other markets and the whole economy. And it seems like the Fed is asleep at the beach. [...] […] Right now the market is screaming at the Fed to reduce rates. The bond market is on the precipice of a real liquidity crunch which could reverberate throughout other markets and the whole economy. And it seems like the Fed is asleep at the beach. […]

]]> by: David Merkel http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10111 Sun, 29 Jul 2007 05:13:46 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10111 Babak, the bond market is in a flight to quality and simplicity. Yields for high grade debt have been falling, while yields for moderate (BBB) and junk grade debt have been rising. The yield curve has shifted to reflect a sooner likelihood of a rate cut, but we saw that earlier in this cycle as well, and it didn't happen. There is real significance to this, even if I don't think the FOMC is going to loosen in 2007. Credit risk is getting repriced to levels that reflect the true risks taken on. Projects that don't deserve financing are getting pulled, or taken down by investment banks that guaranteed financing commitments. The investment banks have pulled in their horns, and most parties have reduced risk tolerance for now. That may shift if there are no defaults in the near term... lenders will gain confidence, and the game might begin anew. Babak, the bond market is in a flight to quality and simplicity. Yields for high grade debt have been falling, while yields for moderate (BBB) and junk grade debt have been rising. The yield curve has shifted to reflect a sooner likelihood of a rate cut, but we saw that earlier in this cycle as well, and it didn’t happen.

There is real significance to this, even if I don’t think the FOMC is going to loosen in 2007. Credit risk is getting repriced to levels that reflect the true risks taken on. Projects that don’t deserve financing are getting pulled, or taken down by investment banks that guaranteed financing commitments. The investment banks have pulled in their horns, and most parties have reduced risk tolerance for now. That may shift if there are no defaults in the near term… lenders will gain confidence, and the game might begin anew.

]]> by: Babak http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10018 Fri, 27 Jul 2007 21:24:55 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10018 David, it would probably nuke the $ but what I can't get past is that the bond market is clearly begging for a cut here. How do you interpret the bond action? or does it not have any significance? David, it would probably nuke the $ but what I can’t get past is that the bond market is clearly begging for a cut here. How do you interpret the bond action? or does it not have any significance?

]]> by: David Merkel http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10003 Fri, 27 Jul 2007 15:42:14 +0000 http://www.tradersnarrative.com/fed-should-cut-rates-immediately-1195.html#comment-10003 Back in late 2006, I suggested that the FOMC was on hold for 2007, which at that point, was an out-ot-consensus view. I still think the FOMC is on hold. The Bernanke put, if there is one, has a much lower strike than the Greenspan put. He also does not rein in the hawks at the FOMC, as Greenspan did. Cutting rates here would lead the dollar to fall, and inflation to rise. I doubt that it would help the markets much... you'd get a series of failing rallies, kind of like the 2000-2002 experience. Back in late 2006, I suggested that the FOMC was on hold for 2007, which at that point, was an out-ot-consensus view. I still think the FOMC is on hold. The Bernanke put, if there is one, has a much lower strike than the Greenspan put. He also does not rein in the hawks at the FOMC, as Greenspan did.

Cutting rates here would lead the dollar to fall, and inflation to rise. I doubt that it would help the markets much… you’d get a series of failing rallies, kind of like the 2000-2002 experience.

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