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Fed's Kocherlakota: US interest rates are not low enough
Fed speak is just that, We used to call it jawboning. Both senireos are bad, but I think inflation would hit seniors harder than deflation - at first anyway.
Just added a sliver to my dollar hedges (commodities and local currency EMs). Took that from couple well performing balanced funds. Insurance down the road I feel. FWIW
Damned these spell checkers. "Fed Speak" showed up as "Ford Speak" at first. And sliver as silver until I corrected!
Will this newly proposed round of "EU-QE" (Central Bank of Europe) provide an additional mechanism for what Kathleen Gaffney (of Eaton Vance Bond Fund) calls the new "carry trade" to ramp up?
This carry trade strategy (as I understand it) involves buying US Treasuries with borrowed money from lower rate countries and capturing the yield spread. So long as there is a buyer for our bonds (other than the Fed) and inflation remains subdued; raising interest rates might not be in the cards just yet. Until real economic growth returns and QE interventions stop interest rates on Sovereign debt (including US treasury bonds) are more likely to fall than rise.
For US Treasury mutual fund bond investors, falling interest rates results in price appreciation in their bond funds.
Will this newly proposed round of "EU-QE" (Central Bank of Europe) provide an additional mechanism for what Kathleen Gaffney (of Eaton Vance Bond Fund) calls the new "carry trade" to ramp up?
This carry trade strategy (as I understand it) involves buying US Treasuries with borrowed money from lower rate countries and capturing the yield spread. So long as there is a buyer for our bonds (other than the Fed) and inflation remains subdued; raising interest rates might not be in the cards just yet. Until real economic growth returns and QE interventions stop interest rates on Sovereign debt (including US treasury bonds) are more likely to fall than rise.
For US Treasury mutual fund bond investors, falling interest rates results in price appreciation in their bond funds.
I would agree that yields will remain low for longer (and possibly much longer) than thought. However, I'd rather be in real assets with a yield (oil royalities, real estate, etc etc) than government paper if that's the case.
Comments
Just added a sliver to my dollar hedges (commodities and local currency EMs). Took that from couple well performing balanced funds. Insurance down the road I feel. FWIW
Damned these spell checkers. "Fed Speak" showed up as "Ford Speak" at first. And sliver as silver until I corrected!
This carry trade strategy (as I understand it) involves buying US Treasuries with borrowed money from lower rate countries and capturing the yield spread. So long as there is a buyer for our bonds (other than the Fed) and inflation remains subdued; raising interest rates might not be in the cards just yet. Until real economic growth returns and QE interventions stop interest rates on Sovereign debt (including US treasury bonds) are more likely to fall than rise.
For US Treasury mutual fund bond investors, falling interest rates results in price appreciation in their bond funds.
This link is a nice primer on bonds (I am still a freshman at Bond U):
How Bond Market Pricing Works