AuthorTopic: Da Fed: Central Banking According to RE  (Read 26754 times)

Offline RE

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🏦 Inside the Fed's balance sheet in four charts
« Reply #225 on: March 21, 2019, 12:47:56 AM »
https://www.reuters.com/article/us-usa-fed-balancesheet-graphic/inside-the-feds-balance-sheet-in-four-charts-idUSKCN1R130J

Business News
March 20, 2019 / 4:04 PM / Updated 6 hours ago
Inside the Fed's balance sheet in four charts
Dan Burns

4 Min Read

WASHINGTON (Reuters) - The Federal Reserve will remain the top holder of U.S. Treasuries for the foreseeable future after the central bank said it would stop shrinking its $4 trillion balance sheet by the end of September.

FILE PHOTO: U.S. Federal Reserve Chairman Jerome Powell holds a news conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington, U.S., March 20, 2019. REUTERS/Jonathan Ernst

So just what is inside this vast holding of assets?

Before the financial crisis struck in late 2007, the Fedís balance sheet was less than a quarter of its current size and consisted almost entirely of Treasury securities.

Then, to help foster an economic recovery, the Fed went on a buying binge that ran from the end of 2008 to late 2014 in three phases, a program known as quantitative easing (QE). It bought a mix of Treasuries and mortgage-backed securities (MBS) and over those six years its balance sheet mushroomed nearly five-fold.

Today, Treasuries account for just 55 percent of the assets on the Fedís balance sheet. The other big chunk is MBS at about 40 percent. The remainder is a hodge-podge of other assets, including gold.

The Fed would like to get back to a balance sheet consisting mostly of Treasuries.

(GRAPHIC: The Federal Reserve's balance sheet - tmsnrt.rs/2ULcay0)

But not all Treasuries are the same. These securities range in maturity from 1-month bills to 30-year bonds, and the Fed has held a different mix of these over time.

Ahead of the crisis, its preference was for short-term securities such as T-bills, which mature in a year or less, and shorter-dated notes, typically maturing in no more than five years.

The needs of the QE program changed that, and the programís priorities also shifted over time. The result was that the composition of the Treasuries portfolio is markedly different today than it was a decade ago.

(GRAPHIC: How the Fed's Treasury portfolio has changed - tmsnrt.rs/2HzaYdX)

Before the crisis, for instance, notes maturing between five and 10 years accounted for just 7 percent of the Fedís Treasury holdings, and the longest-term securities, maturing in 10 years or more, were around 10 percent of that portfolio.

The five-to-10 year sector shot up to as much as 52 percent of the portfolio by early 2013 when the Fed was making a concerted effort to lengthen its maturity profile to pressure long-term bond yields lower and boost the housing market. The longest-dated bonds grew to account for 25 percent, and its holding of T-bills dropped to effectively zero.

Today, the Fedís stash of five-to-10 year paper is again its smallest bucket, just over 11 percent. Interestingly it has kept its holdings of long-dated bonds steady, and as the balance sheet has shrunk the share has risen to nearly 30 percent.

(GRAPHIC: The Fed's Treasury holdings by maturity - tmsnrt.rs/2Hv6Iwd)

In his press conference detailing the Fedís plans for its balance sheet over the long term, Fed Chairman Jerome Powell said he would like to see the overall balance sheet continue to shrink a bit more relative to the U.S. economy.
FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

At its peak, the balance sheet was the equivalent of roughly 25 percent of annual U.S. economic output compared with around 6 percent before the crisis.

As a percentage of nominal gross domestic output, the balance sheet today is just 20 percent of the nearly $21 trillion U.S. economy.

Powell and his colleagues at the Fed would like to see it get down to about 17 percent, at which time they would likely begin growing the portfolio again at a pace to maintain that balance sheet-to-GDP ratio over the long term.

(GRAPHIC: The Fed's balance sheet was a quarter of GDP - tmsnrt.rs/2HvdrGt)
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Offline K-Dog

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Re: Da Fed: Central Banking According to RE
« Reply #226 on: March 21, 2019, 09:14:31 AM »
Forever FED financial talk has been about 'ratios' and the need to get them right.  I think the only ratio that is really being tuned here is the ratio of smoke to air they want to blow up our ass.
Under ideal conditions of temperature and pressure the organism will grow without limit.

Offline RE

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📉 Stocks Indexes Drop As Bond Market Flashes Recession Warning
« Reply #227 on: March 23, 2019, 12:06:03 AM »
https://www.npr.org/2019/03/22/706073410/stocks-indexes-drop-as-bond-market-flashes-recession-warning

Business
Stocks Indexes Drop As Bond Market Flashes Recession Warning

March 22, 20199:48 PM ET
Scott Horsley 2010


Major U.S. stock indexes fell Friday as short-term Treasury yields exceeded those on long-term bonds, in what some analysts consider a sign that a recession may be coming.
Spencer Platt/Getty Images

The stock market tumbled Friday as investors digested an ominous warning sign: Interest rates on long-term government debt fell below the rate on short-term bills. That's often a signal that a recession is on the horizon.

The Dow Jones Industrial Average fell more than 460 points Friday, or about 1.8 percent. The broader S&P 500 index fell 1.9 percent.

Ordinarily, the yield on long-term debt is higher, just as 10-year certificates of deposit tend to pay higher interest rates than 3-month CDs.
Are We Ready For A Recession?
Planet Money
Are We Ready For A Recession?

Bond watchers get nervous when that typical pattern is turned on its head.

"We don't see that occur that often, but when it does, it's almost always bad news," said Campbell Harvey, a professor of finance at Duke University.

That's why warning lights started flashing Friday morning when the yield on the 10-year Treasury note slipped below that of the three-month bill. The last time that happened was just before the Great Recession.

Harvey's been keeping a close eye on these rare, "inverted" yield curves for more than 30 years, and treats them as a kind of early warning signal.

"My indicator has successfully predicted four of the last four recessions," he said, "including a pretty important call before the global financial crisis."

Harvey won't actually forecast a recession unless the yield curve stays inverted for at least three months. But even a flat curve ó in which long-term yields are just slightly above short-term yields ó could be an indicator the economy is losing steam.
Fed Signals Rate Hikes May Be Over For 2019
Economy
Fed Signals Rate Hikes May Be Over For 2019

"It might be that we dodge a recession, but the economic growth will be lower ó much lower," Harvey said.

On Wednesday, the Federal Reserve lowered its own forecast of economic growth, to just over 2 percent for the year and signaled that it was unlikely to raise interest rates in 2019.

Fed Chairman Jerome Powell said slowing growth in China and Europe present "headwinds" for the U.S. economy. And ongoing trade disputes are not helping. "There's a fair amount of uncertainty," Powell said.

The unemployment rate is at a low 3.8 percent, but the economy added only 20,000 jobs in February. That was far less than projected by economists and the smallest gain since September 2017.
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Offline Eddie

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Re: 📉 Stocks Indexes Drop As Bond Market Flashes Recession Warning
« Reply #228 on: March 23, 2019, 09:54:24 AM »
https://www.npr.org/2019/03/22/706073410/stocks-indexes-drop-as-bond-market-flashes-recession-warning

Business
Stocks Indexes Drop As Bond Market Flashes Recession Warning

March 22, 20199:48 PM ET
Scott Horsley 2010


Major U.S. stock indexes fell Friday as short-term Treasury yields exceeded those on long-term bonds, in what some analysts consider a sign that a recession may be coming.
Spencer Platt/Getty Images

The stock market tumbled Friday as investors digested an ominous warning sign: Interest rates on long-term government debt fell below the rate on short-term bills. That's often a signal that a recession is on the horizon.

The Dow Jones Industrial Average fell more than 460 points Friday, or about 1.8 percent. The broader S&P 500 index fell 1.9 percent.

Ordinarily, the yield on long-term debt is higher, just as 10-year certificates of deposit tend to pay higher interest rates than 3-month CDs.
Are We Ready For A Recession?
Planet Money
Are We Ready For A Recession?

Bond watchers get nervous when that typical pattern is turned on its head.

"We don't see that occur that often, but when it does, it's almost always bad news," said Campbell Harvey, a professor of finance at Duke University.

That's why warning lights started flashing Friday morning when the yield on the 10-year Treasury note slipped below that of the three-month bill. The last time that happened was just before the Great Recession.

Harvey's been keeping a close eye on these rare, "inverted" yield curves for more than 30 years, and treats them as a kind of early warning signal.

"My indicator has successfully predicted four of the last four recessions," he said, "including a pretty important call before the global financial crisis."

Harvey won't actually forecast a recession unless the yield curve stays inverted for at least three months. But even a flat curve ó in which long-term yields are just slightly above short-term yields ó could be an indicator the economy is losing steam.
Fed Signals Rate Hikes May Be Over For 2019
Economy
Fed Signals Rate Hikes May Be Over For 2019

"It might be that we dodge a recession, but the economic growth will be lower ó much lower," Harvey said.

On Wednesday, the Federal Reserve lowered its own forecast of economic growth, to just over 2 percent for the year and signaled that it was unlikely to raise interest rates in 2019.

Fed Chairman Jerome Powell said slowing growth in China and Europe present "headwinds" for the U.S. economy. And ongoing trade disputes are not helping. "There's a fair amount of uncertainty," Powell said.

The unemployment rate is at a low 3.8 percent, but the economy added only 20,000 jobs in February. That was far less than projected by economists and the smallest gain since September 2017.

Pretty much right on time for my prediction of the last five years...that 2020-2021 would be a bottom, maybe the next crash.

The thing that is different now was pointed out by Marty Armstrong some months ago....there is nowhere for big money to hide now, so a lot of it stays in stocks, more than we used to see.

Crypstos will change that.
What makes the desert beautiful is that somewhere it hides a well.

 

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