MR. BULLARD WOULD LIKE A CURVE WORD
Summary: More volatility in markets, including stocks. Bond yields were down sharply, before turned around on tariff news. Target added to the negatives with several warnings, the first of which further verified the growing “growth scare.” With market interest rates already down sharply, attention turns to the short end. Forward rate markets are beginning to creep toward a sooner Fed rate cut trigger, with one key contract crossing its threshold. The history of the Fed with the yield curve sets out the dynamic, one that has been kept from the public.
QUITE CERTAIN ABOUT THIS UNCERTAINTY
Summary: Practically everyone keeps blaming “uncertainty” for all the “unexpected” results showing up in more and more places. The thing is, the data is getting more certain not less. February’s labor data was conclusive across all the key aspects. Even the Establishment Survey contributed to settling the short run question in the economy, and then added much to the more important interpretation of the jobs market’s overall condition. There is no wiggle room here any longer.
THE REAL LEGACY OF SVB IS TRENDING
Summary: The dollar soared in December and January. Everyone said it was Jay Powell. We now have more than enough evidence to conclusively show, no surprise, it wasn’t. Instead, a pretty significant dollar crisis when primary dealers hoarded massive amounts of Treasuries and foreign central banks and govts used massive amounts of theirs. But it’s the background which led to this which needs reviewing for what it means about a lot more than this recent monetary breakdown. This starts with Silicon Valley Bank.
INDIA PREMIUM
Summary: India’s banking situation has gotten to be a disorderly mess. RBI has had to initiate swaps, TOMOs, repo auctions, what they even called a “bazooka” to calm things down. Where did all this come from? Consequences from the eurodollar premium. According to the latest indications from it, such as primary dealers hoarding another massive record high in Treasury assets and very low yields on Japanese bills, this latest disruption isn’t yet done. The dollar has lost some of its urgency on trade wars fluctuations, not its background premium.
THE FREEZING ECONOMY’S HOT CPI
Summary: At first, these seem like contradictions: a “red hot” CPI at the same time one of the world’s oil giant’s reports laying off one-fifth of its entire workforce. After all, the latter is in response to the realities of oil and gas prices and margins which are main inputs into consumer price measures. Reconciling these two outcomes is not all that difficult once you realize it isn’t a hot CPI so much as a heated interpretation of it, one free from legit economics. It is economics (small “e”) which helps us explain a lot, including the danger of the Beveridge Curve represented by all these things.