Englund

 While some regional bank chiefs mismanaged rising rates, billionaire Andy Beal patiently waited years for yields to rise before buying Treasury inflation-protected securities like crazy. As the Federal Reserve was about to embark on a rapid series of big rate hikes to fight inflation, the sole owner and chief of Beal Bank, based in Plano, Texas, started buying.  Beal bought Treasury inflation-protected securities, mostly with durations of up to three years. He bought a lot of them.  By the end of 2022, Beal Bank’s assets had more than quadrupled to $32.6 billion. The asset rise made Beal Bank the nation’s 61st biggest bank.  Beal has essentially made a massive bet on inflation, buying $21.2 billion of Treasury bonds, Beal Bank’s filings with the Federal Deposit Insurance Corporation show. Just about all of those bonds are TIPS, says a person familiar with the trade who was not authorized to speak publicly.  In the years leading up to the 2008 financial crisis, ...

 But like other bonds, higher interest rates dent their worth:  As the Federal Reserve aggressively raised rates last year, the Bloomberg TIPS index declined 12%, the worst performance in its 25-year history. Eric Wallerstein WSJ 9 March 2023 https://www.wsj.com/articles/inflation-protection-funds-struggle-to-perform-as-advertised-17e8c73c Why Are My Inflation-Protected Bonds Falling When Inflation Is So High? If TIPS can lose market value during high inflation, what are they good for? Matt Grossman WSJ 8 October 2022 https://englundmacro.blogspot.com/2022/10/why-are-my-inflation-protected-bonds.html TIPS are the single best source of inflation protection, but Unfortunately they are expensive, with 10-year TIPS paying 0.9% below inflation.  WSJ 11 May 2021 https://englundmacro.blogspot.com/2021/05/tips-are-single-best-source-of.html Varning för realräntefonder Värst är realräntefonderna, som ger förlust långsiktigt oavsett hur hög inflationen blir. Jonas Lindmark Mornings...

 Before the April 2021 report, Magnusson had been firmly in the lower-for-longer inflation camp. But he suddenly shifted his thinking and concluded the U.S. was about to break away from three decades of low inflation, a view not publicly shared by many in financial markets or professional forecasters at the time. The past year has proven that Magnusson — currently chief investment officer of the now-relocated Wayzata, Minnesota-based Garda, which oversees more than $8 billion for institutional investors Derivatives-like instruments related to Treasury inflation-protected securities, were trading at levels this week that imply Friday’s annual CPI rate for May will come in at 8.5%  What makes Magnusson’s view about the likelihood of inflation ending the year above 7% especially pertinent is that at least one top U.S. policy maker, Lael Brainard, has said she’s looking for a string of decelerating readings to gain greater confidence that the Fed can eventually hit its 2% target M...

U.S. real rates have largely been falling for the last century. Since the presidency of Bill Clinton, the U.S. has run staggeringly large budget deficits, and racked up trillions in government debt, including most recently from the pandemic. Yet real interest rates have continued to fall, often reaching into negative territory, especially for short-term rates. Naïve theory predicted that they should rise. Most observers were not anticipating that expected short rates could fall and stay below -4%. Why hold those assets at all? I don’t have a good answer to that question. Tyler Cowen Bloomberg 31 March 2022 https://www.bloomberg.com/opinion/articles/2022-03-31/how-do-interest-rates-affect-the-economy-no-one-really-knows Förklara detta den som kan.

Att låna ut pengar till världens mest respekterade nationalstater ser nu ut som en ovanligt dålig affär – frågan är bara varför?  Så sent som i mars toppade den amerikanska tioåringen på 1,77 procent... den handlats ned till under 1,2 procent Dynamiken är uppseendväckande men inte isolerad till USA. Den som vill låna ut pengar till Tyskland får nu räkna med negativ avkastning redan nominellt även för obligationer med lång löptid, exempelvis 30 år. Centralbankernas köp av statspapper och tekniska faktorer. Gabriel Mellqvist DI 3 augusti 2021 https://www.di.se/analys/marknadens-krissignaler-bor-tas-med-en-nypa-salt/ Interest rates haven’t been this low in 5,000 years https://englundmacro.blogspot.com/2021/07/interest-rates-havent-been-this-low-in.html I would like to go back to a time when we didn’t wake up in the morning wondering what the Federal Reserve would do.  Its actions have distorted the economy, repressed savers, and made the wealth and income divide far greater than ...

‘I have no doubt, none whatsoever, that we are in a raging mania in all assets.  I also have no doubt that I don’t have a clue when that’s going to end.’ — Stanley Druckenmiller MarketWatch 11 May 2021 https://www.marketwatch.com/story/druckenmiller-still-long-the-stock-market-but-sees-raging-mania-in-all-assets-11620744622 The consumer price index soared 0.8% in April to match the biggest monthly increase since 2009, the government said Wednesday.  Economists polled by Dow Jones and The Wall Street Journal had forecast a milder 0.2% advance. MarketWatch 12 May 2021 https://www.marketwatch.com/story/u-s-inflation-climbs-in-april-to-the-highest-level-in-13-years-cpi-shows-11620823628

Unfortunately they are expensive, with 10-year TIPS paying 0.9% below inflation.  Inflation needs to rise at least that much over the decade just to maintain purchasing power. If inflation fears pick up, TIPS prices are likely to rise as more people buy them.  WSJ 11 May 2021 https://www.wsj.com/articles/if-inflation-is-coming-here-is-what-to-do-about-it-11620694235 Inflation might be the way out of the debt crisis For this entire house of cards not to crumble, growth and inflation need to be restored.  https://englundmacro.blogspot.com/2021/04/inflation-might-be-way-out-of-debt_25.html