Tag: Geroge Yacik

Put The Blame On Me

Posted on by George Yacik

At least since the global financial crisis of 2008, Federal Reserve officials have, by and large, denied or downplayed the idea that their zero-interest-rate policies and mammoth bond purchases have artificially inflated financial assets even as the Fed is buying trillions – with a capital T – of U.S. Treasury and mortgage-backed securities markets and more recently corporate bonds. Now the presidents of a few of the Fed’s regional banks are suggesting that the Fed study whether its monetary policies are encouraging overly risky investor behavior.

Loretta Mester, the president of the Cleveland Fed, conceded that prolonged periods of low rates could incite “higher levels of borrowing and financial leverage, increased valuation pressures, and search-for-yield behavior.”

“While monetary policy that leads to a stable macroeconomy encourages financial stability, it is also possible that in an environment with low neutral rates, a persistently accommodative monetary policy could, in some cases, increase the vulnerabilities of the financial system,” she said.

Boston Fed President Eric Rosengren went even further, suggesting that the Fed “rethink” financial regulation – but apparently not monetary policy – to rein in speculative behavior. Continue reading "Put The Blame On Me" →

The Bank That Couldn't Shoot Straight

Posted on by George Yacik

Other than President Donald J. Trump, Wells Fargo CEO Timothy Sloan has to be the most hated man in Washington, or at least he was this week.

On Monday, the New York Times published a story which said employees at the bank “remain under heavy pressure to squeeze extra money out of customers” despite “years [of] publicly apologizing for deceiving customers with fake bank accounts, unwarranted fees and unwanted products” and claims by top executives that they “have eliminated the aggressive sales targets that spurred bad behavior.” That was a reference to the 2016 scandal in which over a period of many years, thousands of bank employees opened millions of accounts without customers’ knowledge or consent.

But that proved to be only the beginning of the bank’s problems. Since then there has been a steady drip of one scandal after another, from forcing auto loan customers to buy insurance they didn’t need to allegedly overcharging military veterans for mortgage refinances.

Indeed, “each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again, but then a few months later, we hear about another case of dishonest sales practices or gross mismanagement,” Rep. Patrick McHenry, R-N.C., told Sloan at a House Financial Services Committee hearing on Tuesday.

At the hearing, members of both parties lambasted Sloan and his bank. Continue reading "The Bank That Couldn't Shoot Straight" →

Don't Bet On Crises To Keep Bond Rates Lower

Posted on by George Yacik

Despite the recent dip in the 10-year Treasury note yield back below 3%, don’t count on it staying there. Lately, it seems, the only thing keeping the rate below that level is some sort of international crisis – Italy, North Korea, trade wars, etc. But the basic fundamentals determining that rate – economic growth and supply and demand, in other words – are calling for even higher rates, well above 3%.

On the supply side, more Treasury debt is coming to market all the time, like an incoming tide in the Pacific Ocean. On the demand side, there are fewer buyers – and I mean big buyers. More about that in a minute. At the same time, the economy is growing stronger, which by itself is going to put upward pressure on rates.

In other words, if you’re betting that the 10-year yield is going lower, or will stay around or below 3%, you’re really only holding it as a safe haven. Nothing wrong with that, lots of investors do that. But if you’re hoping to profit when something in the world goes wrong, you may be playing a losing game.

First the economy. Last week on CNBC’s Squawk Box, the gold dust twins, Warren Buffett and Jamie Dimon, tried to outdo themselves in how great the U.S. economy is performing. Continue reading "Don't Bet On Crises To Keep Bond Rates Lower" →

Uncle Sam's Bargain Bonds

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates - Uncle Sam's Bargain Bonds


According to a widely reprinted and circulated report in the Wall Street Journal, for the first time since 2000, U.S. government bonds now yield more than all of their developed world counterparts. Looking just at the 10-year security, the yield on the benchmark Treasury note now yields more compared to a record number of countries, and the yield differential between the U.S. government note and its German bund counterpart is its widest in almost 30 years.

Basically, this means that the arguably safest investment available anywhere in the world – the one American business schools still hold up as a “riskless” benchmark – yields way more than most other sovereign debt, including Italy’s, Canada’s and Australia’s – but no, not Greece’s, although they’re not too far off.

Let’s look at the numbers. Continue reading "Uncle Sam's Bargain Bonds" →

That Elusive 3 Percent Yield

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates - 3 Percent Yield


On Wednesday morning, the yield on the benchmark 10-year Treasury note moved back over 3%. In just the past five years, though, that has only happened twice before, but then only for a day or so. Is this the time the yield breaks 3% and stays there?

The most recent time before Wednesday, of course, was just two weeks ago. On April 24 the yield moved a hair above 3.0%%, then hit 3.03% the next day. It then quickly retreated below the magic number and hasn’t gone above it until now.

Before then, the last time the yield hit 3% – and I mean just – was at the very end of 2013 and the very beginning of 2014. It hovered right at 3% for a few days and then subsequently dropped sharply, eventually falling to well below 2.0% over the next year. The last time the note has been comfortably over 3% and remained there, was back in the summer of 2011.

What is it about that 3% mark that fixates investors – or rather, attracts them? Just like in 2013, that 3% figure seems to serve as a buy signal for investors.

Are they making a mistake? Is it really a buying opportunity, or just a bond market head fake? Continue reading "That Elusive 3 Percent Yield" →