Posts tagged: QE3

Here’s What The Changing Stocks-Bonds Correlation Means For Equities When The Fed Tapers

The chart below shows how the correlation between U.S. Treasury yields and  the Dow Jones Industrial Average has varied under each iteration of the  quantitative easing program of bond purchases the Federal Reserve has employed  since the financial crisis. Under QE3 (the current iteration), changes in bond yields have have been  associated with larger changes in equity prices than under any other program.  So, when yields rise, so do equities, and when yields fall, so do equities — in  both directions moreso than in the past. The red square near the top of the chart plots the current levels of the  yield on the 10-year Treasury note and the DJIA. Its place above the regression  line shows that equities are looking rich based on this relationship.


Bond yields-equity prices regression

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CITI: Here’s The New Tapering Schedule

October FOMC statement is causing economists and market  participants to adjust their views on when the Fed is most likely to begin  tapering down its quantitative easing program. After the government shutdown and debt ceiling fight happened — and then was  merely postponed to the first quarter of 2014 instead of resolved — a new Wall  Street consensus formed around the notion that the Fed probably wouldn’t begin tapering until March.

However, the lack of any reference to the fiscal battles in the October FOMC statement spurred a small sell-off in stock and bond markets, and Wall Street  economists began to reconsider when tapering would happen in their reactions to the release. In a note, Citi’s Steven Englander presents a chart to illustrate these changing views. “A good data point or two and there is plenty of room for asset markets to back up,” he writes. “Figure 1 shows our view of the markets  expectations of tapering just prior to the September FOMC, just prior to October’s FOMC and today. The path is indicative, not a hard measure of  investor expectations, but we would stress how modest the pullback in  dovish expectations has been.”

Right now, the Fed buys $85 billion of Treasuries and mortgage bonds each  month. The chart below illustrates different forecasts for the path of how  monthly purchases will eventually be wound down to zero.


What Happened to the Bond Bubble?

“All year the consensus regarding bonds has been that they are in a late stage bubble that is about to pop as long-term interest rates will rise and the price of bonds will sharply plummet. The consensus has been wrong. We saw a sharp spike in rates after Fed Chair Ben Bernanke first mentioned tapering QE3 in June, but the long rate has since come back down and currently stands at 2.51%. It seems the demise of the bond market has been a little premature.

Did the Fed Bail Out the Bond Market?

So what happened to the bond bubble that was supposed to pop? A few things have prevented a catastrophe for investors heavily allocated to bonds. The market had been anticipating the start of tapering of QE3, the Fed’s bond-buying program in which they have been purchasing U.S. Treasuries and mortgage-backed securities. Bernanke first mentioned tapering in mid-June and the 10-year rate jumped from approximately 2.20% to 3.0% in a very short time frame. This was a huge move for bonds, however, the market got ahead of itself as the tapering that seemed like a sure thing never materialized. The Fed kept QE3 unchanged due to what it felt was weaker-than-expected economic data. Since the non-tapering decision, the 10-year Treasury rate has come back down to approximately 2.50%. Read more »


Баланс ФРС: о том, что накопилось и сколько…



Saxo Bank: ФРС ужмется на $10 миллиардов в месяц

ФРС не будет душить мировую экономику, резко сворачивая программу количественного смягчения, уверен главный экономист Saxo Bank Стин Якобсен. Восстановительный бум заканчивается, прогнозы по росту идут на понижение, дешевые деньги все еще нужны. Мы уже видели, что на американском рынке недвижимости становится “прохладно”. Данные по занятости в несельскохозяйственном секторе разочаровали тех, кто заинтересован в восстановлении американской экономики. ФРС использует фразу “существенные улучшения” в экономике (в частности, в ситуации с безработицей), но я не думаю, что даже Федеральный Резерв считает, что низкий уровень безработицы при низком коэффициенте участия на рынке труда говорит о реальном улучшении.

Самой большой проблемой ФРС является неспособность заставить рынок реагировать на “руководство к действию”. Я ожидаю, что заместитель председателя Совета управляющих ФРС Джанет Йеллен (Janet Yellen) попробует заставить рынки слушаться с помощью продления нулевой ставки на еще один год, то есть до 2016 года (ФРС Чикаго пока согласен на середину 2015 года). Я считаю, что сотрудники ФРС понизят свой прогноз по росту экономики США с 2,45% до 1,6% (на нем сходятся экономисты с Wall Street), а также немного свернут программу по покупке активов: на 10 миллиардов долларов США, по 5 миллиардов на ипотечные ценные бумаги и казначейские облигации. Read more »


Emerging world: what to expect from the currencies and the bond markets?

The prospect of less quantitative easing in America has rocked currency and bond markets in the emerging world. There are many reasons why a fund manager might want to sell the rand. South Africa’s economy is barely growing. Unemployment, at 25% of the workforce, is on a par with the grimmest parts of the euro zone. The mining industry is beset by labour unrest just as commodity prices are falling. The country’s large trade deficit is a sign that local producers are struggling in vain against foreign competition. The rand has fallen by 16% against the US dollar this year. Only the Syrian pound and Venezuelan bolívar have fared worse.

Yet these local difficulties are not the only reasons for the rand’s slump. South Africa has the financial markets of a rich country: it is easier to buy and sell bonds and stocks there than in most middle-income countries. So the rand is a convenient currency in which speculators can take a position on emerging markets more generally. As the fast-money crowd sense the beginning of the end of loose monetary policy in America, bonds and currencies in emerging markets are the assets they want to sell. The rand is merely the worst-hit in a long list of vulnerable currencies. Read more »


QE3: Time to Take Profit or Stay in the Trend?

S&P 500 has grown by 2.5% since the beginning of September, 2012. The market owns this growth to 2 days: the 6th of September, when the president of the European Central Bank announced the repurchase of problem assets (S&P 500 grew by 2.02% in a day) and the 13th of September, when Ben Bernanke, the Head of the FRS announced the MBS repurchase for $40B per month (S&P grew by 1.63% in a day). The rest of the month investors were quiet and trying to comprehend what to do next: sell based on fulfilled expectations or buy commodities, high yield bonds, and risky stocks. Read more »


QE3: время зафиксировать прибыль или оставаться в тренде?

С начала сентября 2012 года индекс S&P500 вырос на 3,87%. Подобному росту рынок обязан двум дням: 6 сентября, когда председатель Европейского Центрального Банка объявил о выкупе проблемных активов (рост S&P500 на 2.02% за день) и 13 сентября, когда глава ФРС Бен Бернаке объявил о выкупе MBS на 40 млрд. долл. в мес. (рост S&P на 1,63% за день). В остальные дни месяца инвесторы пребывали в тишине и осмысливали, что делать дальше: продавать на сбывшихся ожиданиях или покупать commodities, high yield bonds, и  risky stocks. Read more »


Осень 2012: что дальше?

Недавнее ралли на фондовом рынке США, поставившее рекорд по количеству положительно закрытых сессий заставляет задуматься, насколько экономические показатели текущего времени оправдывают поведение инвесторов, и главное, что будет дальше. Рассмотрим  фундаментальные факторы для роста рынка и фиксации прибыли, сделав вывод, чего можно ожидать в последние 4 месяца 2012 года. Read more »


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