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Notes on the Capital Markets and a Modest Proposal

August 25, 2006
When assessing the uniqueness of the US economy, the flexibility of its labor markets is often cited as a critical factor. Businesses indeed have a largely free hand in hiring and firing workers. The unionization rate among the private sector continues to trend lower and dissent over tactics led to a split in organized labor about a year ago. Ther…
Notes on the Capital Markets and a Modest Proposal Notes on the Capital Markets and a Modest Proposal Reviewed by magonomics on August 25, 2006 Rating: 5
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Where in the World are the Bond Vigilantes?

August 16, 2006
Investors and speculators have sometimes acted to impose financial discipline when they have concluded that officials are being too lax. The economist Ed Yardeni coined the name “bond vigilantes” to describe such participants when they are doing this. With the third year of a strong global expansion, rising commodity prices and nearly every countr…
Where in the World are the Bond Vigilantes? Where in the World are the Bond Vigilantes? Reviewed by magonomics on August 16, 2006 Rating: 5
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Beware the Ides of August

August 11, 2006
The historic significance of August 15 tends to be under appreciated. It is the day in 1620 that the Mayflower set sail from Southampton with 102 Pilgrims aboard that were destined to change the world. As they celebrated their anniversary 15 years late, the Plymouth colony was hit by its first hurricane. In 1914 the Panama Canal opened, which was …
Beware the Ides of August Beware the Ides of August Reviewed by magonomics on August 11, 2006 Rating: 5
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Curiouser and Curiouser

July 28, 2006
In response to the disappointing preliminary Q2, the market took bond yields lower and the dollar with it. The market downgraded the likelihood of a Fed hike on August 8. Indicative pricing in the Fed funds futures market implies the odds of a hike have fallen to about a 33% chance, the lowest since mid-June and well off the 85% chance seen at the…
Curiouser and Curiouser Curiouser and Curiouser Reviewed by magonomics on July 28, 2006 Rating: 5
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Bernanke Preview

July 18, 2006
Given the heightened uncertainty about the near-term outlook for US monetary policy, this week’s semi-annual congressional testimony by the Federal Reserve Chairman will be closely scrutinized for clues. Federal Reserve Chairman Ben Bernanke’s semi-annual testimony before Congress this week is looked.
The risk is that the market is disappointed. F…
Bernanke Preview Bernanke Preview Reviewed by magonomics on July 18, 2006 Rating: 5
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Could Bernanke be Dollar Negative?

July 14, 2006
The US dollar has recovered nicely from the sell-off that culminated in the immediate aftermath of the disappointing jobs data at the start of the month. These gains were scored despite the movement of interest rate differentials against the US. The fact that the premium the US offers over the euro-zone has narrowed also means that US debt instrum…
Could Bernanke be Dollar Negative? Could Bernanke be Dollar Negative? Reviewed by magonomics on July 14, 2006 Rating: 5
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Policy Dilemma Eases

June 16, 2006
US data in recent days helped ease concern that the economy is not strong enough to withstand the kind of tightening the Federal Reserve may need to enact in order to return inflation and inflation expectations back within officials comfort zone. And make no mistake about it, the pendulum of market sentiment has swung hard, abandoning the one and …
Policy Dilemma Eases Policy Dilemma Eases Reviewed by magonomics on June 16, 2006 Rating: 5
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How Now Greenback

June 09, 2006
We can identify thee main considerations when trying to ascertain the near-term outlook for the US dollar: market positioning, interest rates and the G7/IMF. Let’s review each, but to cut to the chase, the first two seem dollar supportive, though the third may exert pressure in the other direction.
Market Positioning
The market had amassed substanti…
How Now Greenback How Now Greenback Reviewed by magonomics on June 09, 2006 Rating: 5
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Strong Dollar in Word, Benign Neglect in Deed

June 02, 2006
The disappointing May employment data caught the market wrong-footed. The pricing of the July Fed funds futures contract had implied almost a 75% chance of a 25 bp hike later this month prior to the data and the combination of weaker than expected payroll growth and a moderate rise in hourly earnings have seen the odds fall toward 40%. As one woul…
Strong Dollar in Word, Benign Neglect in Deed Strong Dollar in Word, Benign Neglect in Deed Reviewed by magonomics on June 02, 2006 Rating: 5
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