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Bonds go to market with suggested rates based on where existing bonds of like kind are trading based on investor action .But investors bid on them and drive them to wherever
Investors have created inverted yield curves a few times when they disagreed with papa fed raising rates and they won the battle then too over riding fed actions
Is the Fed. using a new twist operation that I missed or something?
They can try influencing things via yield control and creating demand for bonds by buying them but if the worlds investors see things differently they are no match for the world bond market.
The fed talks about where investors are taking bond rates here .
Obviously the Fed has to raise rates eventually (right?) with the current glut of cheap debt and record stocks the fallout wont be good will it? What president is going to appoint a fed chairman that will actually raise rates, even if the fed has already said they will be near zero for a few more years.
I think you misunderstand the duties & powers of the Fed Chairman compared to the rest of the Board of Governors and of the FOMC.
All seven board members of the Federal Reserve Board of Governors and five Federal Reserve Bank presidents direct the open market operations that sets U.S. monetary policy through their membership in the Federal Open Market Committee (FOMC).
The Chairman only gets one vote. It is not like a corporation where the President/CEO/Chairman says "jump" and the rest of the corporation responds "how high?"
I don't think the Fed is independent of political pressure.
William Miller was chosen to fight unemployment, and he resisted raising interest rates during his tenure despite inflation getting out of control, and in fact there was a lot of second guessing of him. Maybe he was just incompetent and never saw the error of his ways, but it sure looks like he was hired with marching orders and he carried them out until the situation became untenable.
I'd like to think the Fed has since been more independent, and that's probably true. But it was suspicious when Powell eased off on the rate increases after Trump made a ruckus.
William Miller was a sub-optimal choice because he had no formal education in Economics (he lacked a PhD in Economics). He was a graduate of the US Coast Guard Academy & Boalt Law School (UC Berkeley), and was CEO of Textron at the time of his appointment.
Advisors to President Carter liked Miller for the job because he had strong leadership skills and they thought he could learn economics on-the-job. Miller told President Carter he wasn't qualified, but would take the job if that was what the President desired.
Regardless, Miller only had a single vote.
Last edited by RationalExpectations; 02-19-2021 at 09:15 AM..
They can try influencing things via yield control and creating demand for bonds by buying them but if the worlds investors see things differently they are no match for the world bond market.
The fed talks about where investors are taking bond rates here .
I may well be missing something but I see zero controversy or hint of a problem. Longer yields moving from near flatline with no scary spike is a good thing IMO. I'd bet most Fed types would agree.
Markets anticipating a bit of inflation down the road does not mean the Fed should do anything now.
I may well be missing something but I see zero controversy or hint of a problem. Longer yields moving from near flatline with no scary spike is a good thing IMO. I'd bet most Fed types would agree.
Markets anticipating a bit of inflation down the road does not mean the Fed should do anything now.
Exactly . The fed is happy rates are rising by investors bidding them up on bonds .
But ,and a big butt ....there is a tipping point where rising bond rates will slow growth , it will raise corporate borrowing to high levels ...it will act as a tax sucking money out of companies that need it .
That is why they are issuing bonds in the first place .
Rising bond rates effects all aspects of our lives including fixed rate mortgages so there is a tipping point where the fed will jump in to try to do yield curve control and reverse those rates.
Or a black swan event and a flight to safety will have investors do it for them as they flock to safety assets soaring the prices on those assets and reducing yields .
Personally that is what I am betting on now by owning long term treasuries and gold to go along with my equities and cash instruments.
March saw investors bid the 10 year down to .52% ..today it is over a 100% higher ...
Last edited by mathjak107; 02-19-2021 at 01:17 PM..
Reason: D
Exactly . The fed is happy rates are rising by investors bidding them up on bonds .
But ,and a big butt ....there is a tipping point where rising bond rates will slow growth , it will raise corporate borrowing to high levels ...it will act as a tax sucking money out of companies that need it .
That is why they are issuing bonds in the first place .
Rising bond rates effects all aspects of our lives including fixed rate mortgages so there is a tipping point where the fed will jump in to try to do yield curve control and reverse those rates.
Or a black swan event and a flight to safety will have investors do it for them as they flock to safety assets soaring the prices on those assets and reducing yields .
Personally that is what I am betting on now by owning long term treasuries and gold to go along with my equities and cash instruments.
March saw investors bid the 10 year down to .52% ..today it is over a 100% higher ...
Okay. I totally misread what you meant....my bad.
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