With interest rates plunging all over the world, including right here in the U.S., many fixed-income investors are scratching their heads about where they can find something that pays more than 1% without taking on a pile of risk.
The answer is right under their noses. Plus, the return is way better than you can get on stocks and bonds (even gold!). Not only that, but the return is guaranteed.
What is this magic investment? Continue reading "How To Profit From Brexit - Guaranteed!"
The Federal Reserve has made it pretty clear, by its actions if not by many of its pronouncements, that, like Melville’s Bartleby the Scrivener, it really would prefer not to do anything. Now it looks like it’s planning to take off not just the rest of this year but the next couple of years, too.
Instead of no rate increase this year, which is looking more and more like a done deal, we may not see higher rates until 2019 at the earliest, at least according to one Fed official.
Last week, as expected, the Fed left interest rates unchanged while lowering expectations for future rate increases, both this year and beyond. In arriving at that decision, which was unanimous, the Fed’s monetary policy committee cited recent weakness in the jobs market, previously an area of relative strength in the economy. Continue reading "Fed To Markets: See You In 2019"
With interest rates on 10-year Japanese government bonds already deep into negative territory and comparable German bunds just a basis point or two away, most of the world’s safest debt instruments are trading below zero. With the notable exception of U.S. Treasuries.
While we’re still a long way from reaching that point – the benchmark 10-year Treasury note ended last week at 1.64%, its lowest level in nearly a year-and-a-half and down more than 60 basis points so far this year – it’s certainly not too early to start thinking about it. After all, if it can happen in Germany and Japan and several other countries, why not here?
Switzerland’s 10-year government bond closed last week at negative 0.50%, while the comparable Japanese bond ended at minus 0.15%.
Germany’s 10-year bund, the benchmark for the euro zone, closed at just two basis points above zero. The average yield on all German government debt outstanding is now below zero.
In real life, this means that if you buy a Swiss or Japanese bond today and hold it to maturity, you’re guaranteed to lose money. Such a deal.
What’s driving this madness? Continue reading "Are We Ready For Negative Interest Rates?"
Is the Federal Reserve, which has been signaling a rate increase in the “coming months,” really going to do so after last week’s lousy May jobs number?
And if the jobs economy, which has been one of the few bright spots in the economy lately – that is, of course, if you ignore the 94 million or so adults not working – is as soft as the report indicates, will the Fed be able to raise rates at all this year?
To my way of thinking, the Fed has only until September if it’s going to raise rates this year. After that, we’ll be in the final two months of the presidential election campaign, and there is no way the Fed is going to make any moves then, especially if such a move were to jeopardize the chances of Janet Yellen’s party’s nominee.
Following the awful May jobs report, I think we can pretty much dismiss the idea of a rate increase at the June meeting, now less than two weeks away. July remains a possibility, but there will have to be an awful lot of improvement in the economy by then, and there’s not a lot of time between now and then. There is no meeting in August, so that leaves the September 20-21 meeting as the only real possibility, and even then the odds in favor of a move less than two months before the election are pretty small.
Just how bad was the May report? Continue reading "Lousy May Jobs Report Makes Fed Increase Unlikely This Year"
The Federal Reserve's interest rate liftoff schedule for this year is slowly but surely slip slidin' away, like a space launch aborted by bad weather. It makes you wonder which government agency is directing U.S. monetary policy, the Fed or NASA.
The minutes of the Fed's June 16-17 monetary policy committee meeting released July 8 were a lot more dovish than the announcement that immediately followed the meeting. It now looks like a September rate liftoff isn't as baked in the cake as many previously believed just a few weeks ago.
Since then, of course, a lot has changed, almost all of it conspiring against an early rate increase. September is a lot less likely to happen now, and even December looks doubtful. I didn't think the Fed was courageous or confident enough to make a move this year anyway, so the events of the past few weeks make me more comfortable with that position. Continue reading "Slip Slidin' Away"
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