Our investment professionals share and challenge each other’s views, creating a diverse marketplace of ideas for the Wellington Blog.
When Janet Yellen was confirmed as US Treasury Secretary in January 2021, questions inevitably resurfaced as to whether the Treasury should begin issuing a 50-year or even a 100-year ultralong note.
Just a few years ago, the Treasury’s debt managers, in consultation with the Treasury Borrowing Advisory Committee (TBAC), reviewed the potential issuance and concluded that it would not meet the Office of Debt Management (ODM)’s mandate of financing the government at the lowest possible cost of debt. Moreover, an ultralong note would present a challenge to the Treasury’s goal of “regular and predictable” issuance.
My purpose here is not to advocate for or against ultralong issuance, but rather to…
Investors can breathe a collective sigh of relief — for now anyway. The Federal Open Market Committee’s (FOMC’s) March statement and press conference suggested that the FOMC is likely to look through any inflation pickups this year and wait until the labor market has recovered to assess whether inflation can sustainably stay around 2%.
The FOMC projects significant improvement in the unemployment rate and a modest overshoot of its 2% average inflation target in 2021. But even against expectations for higher growth and inflation this year, the median FOMC member’s forecast still anticipated the…
The number one question most cash investors are asking themselves (and us) these days is: How long are we going to be stuck in this “zero-bound” range for short-duration interest rates? Here are our latest thoughts on that and related matters.
The Federal Open Market Committee’s (FOMC’s) December statement and press conference provided additional assurance that asset buying would continue for the foreseeable future, noting that purchases of US Treasuries and agency mortgage-backed securities (MBS) would proceed at their current pace at least until “substantial further progress has been made” on the labor market and inflation outlooks.
The US Federal Reserve (Fed) appears committed to its dovish monetary policy stance and will likely continue to provide extraordinary accommodation as long as necessary. This is largely because, despite ongoing improvement, the US economic outlook remains highly uncertain. A downside surprise regarding…
I think the US Federal Reserve (Fed)’s newly unveiled framework for its long-run goals and monetary policy strategy, combined with its recent statements, signals a fundamental change in how the central bank will conduct monetary policy from here on.
Prior to the 2008 financial crisis, the Fed would tend to hike interest rates when the unemployment rate fell below NAIRU.1 The Fed’s latest statement made clear that this is no longer a sufficient reason to raise rates, unless accompanied by inflation exceeding its target in order to deliver a 2% average inflation rate.
In general, the communique was dovish in that the Fed is basically saying that it will need to see both low unemployment and above-target inflation before it will consider hiking rates. The Fed’s policy rate is likely going to be…
The Federal Open Market Committee’s (FOMC)’s September statement and press conference did not deliver any big surprises. The upshot is that the US Federal Reserve (Fed) appears to be committed to maintaining its “dovish” monetary policy stance for the foreseeable future.
Look no further than the Summary of Economic Projections (SEP), released in conjunction with the FOMC meeting minutes, in which the majority of participants indicated that Fed policy rates should remain around zero through 2023. This was largely expected, given the recent shift in the Fed’s inflation framework: Whereas the Fed has historically targeted an average inflation rate of 2% over time, under the new framework, the Fed could allow inflation to…
On 23 March 2020, the US Federal Reserve (Fed) launched the Secondary Market Corporate Credit Facility (SMCCF) — a special-purpose vehicle (SPV) designed to support the corporate-bond market in the face of the COVID-19 crisis. In late June, the Fed released an official list of its initial bond purchases made via this program.
The more I think about the Fed taking the unprecedented step of buying corporate bonds as part of its crisis-response arsenal, the more I believe it’s difficult to overstate the implications. Here are some of my latest thoughts on the matter.
In my view, the Fed’s corporate-bond-buying program:
Given the weak economic data and considerable uncertainty clouding today’s landscape, I must admit to being a bit skeptical about how long the current rally in risk assets can last. But in the interest of staying open to alternative views, I recently listened to an economist for a major Japanese financial company deliver a refreshingly optimistic take on the global economy and markets.
His main point was simply that this is the first time in modern history where fiscal and monetary policy are working together – both are coordinated, both are easing – because inflation is nowhere in sight. Usually, those two policy levers work against each other (i.e., “tight fiscal/loose monetary” or “loose fiscal/tight monetary”).
The atypical “loose fiscal/loose monetary” regime we have now sends a powerful signal to the markets, regardless of the damage done to…
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