Good morning everyone,  I have some exciting — and also – sad news to tell you today.  First, I am going Bloomberg as a Senior Editor. And I am going to use that (much larger) platform to share my views on the macro economy and financial markets. I am really excited about it too. It’s a great team of people I am joining and so many resources to help me write good market and economic analysis. So that’s the good news, the really good news! The sad news is that, as a part of that move — and after thirteen wonderful years writing Credit Writedowns — I am putting the site on hiatus.  ..read more

As I write this, the US 10-year Treasury bond is yielding 1.457%, well under the trading range it had established during this quarter. And there are a lot of theories as to why this is happening. I want to spell out how I’m thinking about the yields and what the risks and opportunities are going forward. So let me start with what the Fed can and cannot do to influence that rate and move from there to market participants and the outlook for real economy as the three main determinants. The Federal Reserve’s role Because of the Federal Reserve’s role as a monopoly supplier of reserves, it sets ov ..read more

Quick note here to follow up on the macro crystal ball post I wrote a couple of weeks ago (link here for subs).  Michael Msika over at Bloomberg had a piece out on the return of capex powering the next rally. And for me it connected a lot of dots. Let me outline my thinking below. What I wrote in the macro crystal ball piece was this: there is a sequencing that I am looking for though. The sequence goes from consumers’ wages to consumption to industrial production to capital spending and corporate profits. That means wages should be key to the strength and durability of a recovery. While ..read more

We got a big CPI print today, 5.0%. That’s above expectations. And, we saw a mild uptick in US Treasury bond yields on the back of the number. But I am wondering whether it really matters. Let me explain. Yesterday, after posting on the death of the so-called bond vigilantes, I was talking to my friend J. And I told her that, back in February, I had been writing about my concerns regarding inflation expectations becoming unanchored.  In our conversation, I referred to these comments: this [rise in yields] is the market frontrunning the Fed based on expectations about real GDP growth or i ..read more

Earlier today, Bloomberg reported that the yield on a 10-year US Treasury bond fell below 1.50% for the first time in months. And this happened literally the day before a consumer price inflation number expected to come in at 4.7%. That means the US ten-year yield is deeply negative in real terms. The question is why. And what does this mean for bond investors? “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But know I would like to come back as the bond market. You can intimidate everyone.” -James Carville, Ad ..read more

This is the legacy Credit Writedowns blog and archive. Click here to visit The Credit Writedowns Newsletter. Your readership is greatly appreciated!     The post US jobs report fails to reinforce tapering narrative; bad news is good news appeared first on Credit Writedowns ..read more

This is the legacy Credit Writedowns blog and archive. Click here to visit The Credit Writedowns Newsletter. Your readership is greatly appreciated!     The post ADP and claims data show US employment progress appeared first on Credit Writedowns ..read more

This is the legacy Credit Writedowns blog and archive. Click here to visit The Credit Writedowns Newsletter. Your readership is greatly appreciated!     The post The macro crystal ball: macro framing and historical antecedents appeared first on Credit Writedowns ..read more

This is the legacy Credit Writedowns blog and archive. Click here to visit The Credit Writedowns Newsletter. Your readership is greatly appreciated!     The post Where were claims at this point in the last cycle? appeared first on Credit Writedowns ..read more

In yesterday’s post, the question was this: how bad do inflationary impulses have to get – even if they’re just transitory – to matter? The Fed is telling you they have to get pretty bad for it to react. And with US Treasury bond yields sat at 1.58%, the Treasury market is telling you the same thing. What’s the housing market saying though? Bill McBride has the answer here: On a price-to-rent basis, the Case-Shiller National index is back to March 2005 levels, and the Composite 20 index is back to August 2004 levels. In real terms, prices are back to 2005 levels, and the price-to-rent ratio i ..read more