Taking a break at halftime of Temple/Cornell to post this prediction from RBS. They have moved back the date of the first rate hike from June to September. Even w/that, they expect FF to hit 1.75% by year end and 5% in 2011! Certainly got to give them credit for a contrary opinion ... http://www.marketwatch.com/story/rbs-sees-fed-hiking-in-september-not-june-2010-03-19 RBS sees Fed hiking in September, not June NEW YORK (Market Watch) -- RBS Securities now expects the Federal Reserve to begin raising interest rates in September, pushing back its forecast for a June increase in the central bank's target lending rate. The firm pointed to the Fed's monetary-policy setting committee's reiteration on Tuesday that rates would stay low for an extended period. "Given that 'extended period' is generally interpreted to be six months, the prospects for a June rate hike now look extremely dim," said Michelle Girard, an economist at RBS, in a note Friday. Still, once the Fed starts raising rates, it will be done aggressively -- in half-percentage point increases at the last three meetings of the year, according to RBS. That would take the fed funds rate to 1.75% from a range of zero to 0.25% currently. Rate hikes will continue in 2011, pushing borrowing costs to 5%, the firm said. Economists surveyed by MarketWatch expect, on average, that the first rate hike will come in the first quarter of 2011.
Bullard is yapping away again, I think he might join Hoenig this time, although that is not yet clear http://www.cnbc.com/id/35982130
Are insurance companies the next big short? I spent a bit of time reading about the health care reform bill just passed. Let me see if I get this right ... 1. Catastrophic policies to be outlawed over time. These are high deductible policies that cost very little, but the insured is responsible for pretty much all routine costs. Instead, folks will be forced into buying policies that pretty much cover you from the first dollar - these are about 5x - 10X more expensive. 2. Coverage can no longer be denied or more expensive on the basis of a pre-existing condition. 3. The fine for refusing to buy insurance is far less than the cost of the insurance. Given the small fine and the elimination of pre-exisitng condition denial, it makes perfect sense for many folks to not buy insurance, pay the fine, and, upon getting sick, purchase insurance. 4. Given #3 above, insurance premiums for everybody else will skyrocket - providing a temporary boost to insurers profits and their stocks (witness today's action) 5. Given #4 above, business will no longer offer insurance to employees. 6. Insurance companies will go bankrupt.
Paulson and Co might be interested in a GGP stake http://www.bloomberg.com/apps/news?pid=20601206&sid=aV4QrfJkFlr4
Rates already on the rise. 3 mo. libor was up to .27 last I checked. http://ftalphaville.ft.com/blog/2010/03/23/183216/beware-repo-rates-are-on-the-rise/ Beware, repo rates are on the rise Posted by Izabella Kaminska Itâs been less than a month since the Federal Reserve resumed its Supplementary Financing Programme in a bid to begin draining liquidity, but the effects are already creeping into the rate market. ...
This is true, mainly due the 3m OIS having reached 20bps. The actual libor-OIS spread is only up a bit. This is within my expectation that the new FF equilibrium is about 17-20bps, so I'm not concerned. Still I'm not willing to risk a long at ZQ at this point, will have to watch the EFF for a month and the libor to see if there are any surprises
Bill Gross commentary http://www.pimco.com/LeftNav/Featur...O/2010/Rocking-Horse+Winner+April+2010+IO.htm
Bonds beaten w/the ugly stick yesterday after the auction - they were down nicely before the auction fwiw. The usual suspects are out proclaiming the ugly auction means there won't be enough buyers for all of our debt. Japan has had at least a dozen weak or failed auctions over the past decade - the same folks were quick to declare the end of the JGB bull market. If bonds are getting hammered, its just a delayed response to the insanity in equities. If equities are going up 9 out of 10 days, and by 5%/month, there isn't much of a need to own bonds at these prices.