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The Looming US Debt Refinancing Crisis in 2025
Read Time: 3 minutesIn 2025, the U.S. Treasury faces the daunting task of refinancing approximately $7 trillion of maturing debt. This staggering figure arrives at a time when bond yields are climbing, exacerbating the financial strain. The convergence of this massive refinancing obligation and rising yields presents a formidable challenge to the economic stability of…
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Gold’s Glimmer: When Rates Fall, the Bullion Calls!
Read Time: 3 minutesThis is a test excerpt!
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Gold Rush 2.0: When Interest Rates Play Hard to Get
Read Time: < 1 minuteThis is a test excerpt!
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The US Economy looks resilient despite the high rates
Read Time: 2 minutesHere is why the Fed hiked rates above 5% and yet the US economy doesn’t break. The last time Fed Funds were raised aggressively towards 5% and kept there with a long, hawkish pause was in 2006-2007. And clearly something broke then: the US housing market, which broke havoc in the banking…
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Fed’s Move: An end of the cycle?
Read Time: 2 minutesThe Fed just made a move which could mark the end of the cycle. Yesterday, the Fed released their new Summary of Economic Projections (SEP) which also includes the famous ”Dot Plot”. Headlines mostly focused on: – 2024 changes: there is only one (!) cut seen this year as the median outcome…
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Can the US handle high rates for longer?
Read Time: 3 minutesOne of the most important macro charts in the world. It shows the tight relationship between total economic debt levels (orange, RHS) and real interest rates (blue, LHS inverted): the higher public and private sector debt burdens, the lower real interest rates must be for the system to keep afloat. Since the…
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FX market on intervention watch
Read Time: 2 minutes[responsivevoice_button rate=”1.3″ pitch=”1.1″ volume=”2″ voice=”UK English Female” buttontext=”CLICK TO LISTEN THE ARTICLE”] USD Dominance & Japan’s Worries European Inflation Concerns Additional Market Observations
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Does the Fed print money?
Read Time: 4 minutesNo, it doesn’t. Instead, it creates something called bank reserves. But are bank reserves money? They’re a bit more complex than that yet nearly everyone equates these things with money. They are the reason why so many have been confused and left wrong-footed on everything from inflation risks to economic growth potential…
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FOMC: What are the possible scenarios?
Read Time: < 1 minuteTomorrow’s FOMC rate decision isn’t expected (according to Fed Fund futures) to end with a rate cut. However, the group will also update its forecasts which include projections for where rates will be end of 2024 (and further out). My scenario table:
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March FOMC Shouldn’t Be A Game Changer
Read Time: 5 minutesWhile the March FOMC meeting may spark some intra-day, or intra-week, volatility for the financial markets, the decision itself seems unlikely to be a game-changer from a bigger picture perspective, with the broader direction of policy set to remain unchanged, as the policy backdrop remains supportive for risk. What the FOMC do…
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US Budget Deficit Raises Concerns of Inflation Despite Fed Tightening
Read Time: 3 minutesWe saw yesterday the proposal of the Biden administration for the 2025 budget. The projected deficit is 6% of nominal GDP. This is the equivalent of 1.7 trillion dollars. The budget constraint says that there are two ways to fund a deficit: 1) increase the money base, and 2) increase the level…
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DXY: A range bound motion
Read Time: 2 minutesSo far in 2024, DXY continues to trade in boxes. The reasons are pretty much the same as observed below. Data keeps coming in stronger for US, and markets do not actually want to believe it because higher inflation is in no one’s forecast. Further to this, synchronized global macro backdrop means that ECB/BoE will more…
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Navigating Economic Waters: Fed’s Balancing Act Unveiled
Read Time: 3 minutesFOMC Minutes Preview: Balance Sheet Guidance in Focus The minutes from the Federal Open Market Committee (FOMC) meeting on January 30th-31st are set for release, with anticipation centered around balance sheet policy guidance. Chair Powell’s remarks during the press conference hinted at upcoming discussions about the pace of balance sheet run-off. While…
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Trump’s odds of winning the elections are moving up
Read Time: 2 minutesThe chart shows how until 2016 US politicians applied fiscal policy in a counter-cyclical fashion. When unemployment rate (blue) was low like in 2006-2007, they proceeded with a conservative fiscal stance (orange) and reduced deficits.Instead when a big crisis hit like in 2008 and the unemployment rate moved higher, they tried to…
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China’s visible US holdings relative to its reserves
Read Time: 5 minutesChina’s most visible US holdings (the Treasuries held with US custodians) ticked up in the November data, so the TIC release didn’t get much coverage (valuation changes should have pushed the market value of all foreign holdings up in November) I usually push back against overly dramatized headlines about China selling Treasuries…
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Pay Attention to liquidity!
Read Time: 2 minutesUNEXPECTED LIQUIDITY IN FINANCIAL SYSTEM Despite the Federal Reserve’s efforts in Quantitative Tightening (QT), there remains a surprising surplus of liquidity in the financial system, creating a notable ‘money mystery.’ This phenomenon has fueled various bullish narratives, with higher liquidity being credited for supporting the stock markets throughout 2023. As we approach…
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Bond Markets and its signals
Read Time: 3 minutesWhat’s the bond market signalling? The most simplistic approach is to simply look at market-implied Fed Funds for the next 12-18 months. This easy approach shows bond markets are pricing ~175 bps of cuts by early 2025. That’s a lot. And it’s an argument used to say ”the bond market is ahead…
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A macro insight – about the interest rates!
Read Time: 2 minutesIn the macroeconomic landscape, the Federal Reserve (the Fed) has been swiftly increasing the Fed Funds rate, reaching a significant 5.25%, a level last seen in 2007. However, the circumstances are different now compared to that time. In 2007, there was less financial leverage, a younger demographic, and no lingering scars from…
