That marks the first time since 2011 that the ECB has raised rates, and takes Europe’s main rate back to zero. Rates in the region have been negative since 2014.
Edit. in not unrelated news, the Italian government collapsed. The ECB announced a plan for Germany to bail out Mediterranean Euroweenie basketcases. let’s see how happy they are about that after Putin shuts off the gas.
You’re right, and I’m not only jumping for joy, but preparing to kick the pants of the guy that I asked about the closing rate. He said it fell below .5 which meant .375. I wished I’d put more in, and may do so on the re-openings.
The bond price has skyrocketed over the last six days and the real yield for the 10 year tips has dropped to 0.18%. The five-year tips real yield is now negative. This makes no sense to me given the prospects of hundreds of billions of dollars of additional government spending but the market does not have to make sense.
While not my expectation, I’m okay with it. The funds for my .625 TIPS will be withdrawn today. I also got 26-week T-Bills at 3.005. I’m praying that the Fed guvnuhs don’t get too weak-kneed before then.
An inflation gauge that the Federal Reserve uses as its primary barometer jumped to its highest 12-month gain in more than 40 years in June, the Bureau of Economic Analysis reported Friday.
The personal consumption expenditures price index rose 6.8%, the biggest 12-month move since the 6.9% increase in January 1982. The index rose 1% from May, tying its biggest monthly gain since February 1981.
To me, that’s a good sign that the recession, and lowering of interest rates, won’t be recognized until well after the election, probably the end of the first quarter.
Aren’t recessions always recognized slightly late and retroactively? I mean, we might no longer be in a recession (assuming we’re even in one using the “GDP-only” definition), but we won’t know until October
To quote Shakespeare I think, Beware the ides of September. Right now all the summer interns are having fun buying the stock market but when the regulars return in September things could turn down.
Holding cash, in other words, was an explicitly defensive decision for much of the last 12 years. Of course it offered a worse return than anything else in the market. That was the point. Holding cash was the price of security, an insurance policy against that prevailing gloom. And like insurance, it could be expensive. USD cash underperformed both the S&P 500 and the US 10-year every year from 2010 to 2020 except two (2013 and 2018).
But the idea that holding cash means paying for insurance is no longer accurate. US 6-month T-bill yields (3.1%) are the highest since late 2007 and offer 157bp more than the dividends of the S&P 500, 21bp more than US 10-year Treasuries and just 60bp less than the US Aggregate Bond index . For USD investors, cash has ceased to be a material drag on a portfolio’s current yield.
Thank you. I had no idea that new issue Treasuries were available thru brokerages. Thanks to your post, I was able to participate in the last auction without transferring funds to my bank so that TreasuryDirect could pull them. I owe you a beer.
Now that the Tbills are in your brokerage account you can easily sell them if you need to raise cash. You can also buy treasury securities at auction in an IRA.
Harry Sit has a lot of other good stuff at his website and it is worth going through it.
The U.S. Treasury’s reopening auction today of CUSIP 912810TE8 — creating a 29-year, 6-month Treasury Inflation-Protected Security — got a real yield to maturity of 0.92%. This was the highest yield for any auction of this term in more than 2 years.
With the 0.92% real rate and the 3.22% interest rate on the 30 year nominal bond, this implies a breakeven inflation of 2.3%. This is ridiculously low given our huge national debt and the continuing out of control spending.
But even given that mispricing, the tipswatch columnist says this is not for small scale investors who should stick to shorter terms.
I’m still hanging out with the ten year TIPS, and will be watching the Sept re-opening. I would like to say that if the yield gets high enough, I might look at a 30, but I don’t see that until late next year, at best.
Before we be daancin in the streets, I need peachiness to last until Feb 1. :