Morning Note: Fed catching heat…

So the 6-day rally in interest rates looks like it won’t make it to 7. 

Yesterday the treasury auctioned off a few billion worth of fresh 10-year debt that was met with aggressive investor demand. I.e., the debt market’s not all in on the off-to-the-races narrative.

Thus, the 10-year is trading notably higher (yield lower) as I type.

The at-expectations CPI number this morning likely calmed some inflation fears as well…


Asian stocks leaned green again overnight, with 10 of the 16 markets we track closing higher.

Europe’s mixed this morning, with 9 of the 19 bourses we track trading lower thus far.

U.S. major averages are mixed as well: Dow up 7 points (0.02%), SP500 up 0.19%, Nasdaq up 0.49%, Russell 2000 down 0.33%.

I should note that market breadth this morning is, well… kinda stinky: Energy, banks, materials, industrials and telecom are all selling off as I type. 

The VIX (SP500 implied volatility) is down 3.56%. VXN (Nasdaq i.v.) is down 1.80%.

Oil futures are up 0.24%, gold’s up 0.03%, silver’s down 0.27%, copper futures are up 0.57% and the ag complex is up 0.25%.

Again, the 10-year treasury is up (yield down) so far this morning. The dollar’s up 0.26%…

Led by utilities, tech, consumer staples, emerging markets and gold — but held back by the sectors mentioned above — our core mix is off 0.12% to start the day.

The Fed’s finally catching some extremely justifiable, and overdue!, heat from sources they themselves respect”

“Mohamed El-Erian, chief economic adviser at $2.8 trillion asset manager Allianz and the former chair of President Obama’s Global Development Council, became the latest heavy hitter from the financial industry to issue a rebuke of central banks’ policies.

What he’s saying:

“There is abundant evidence that the beneficial economic implications are low, and the costs include irresponsible risk-taking, higher inequality, distortion of financial markets such as negative interest rates and misallocation of resources,”

“I don’t think central banks quite realize how much irresponsible risk-taking is going on,” 

“In 2010, Ben Bernanke talked about the benefits, costs and risks that come with unconventional policy.

…the longer you maintain it, the lower the benefits, the higher the costs and risks. This was ten years ago. At that time, Bernanke was thinking of unconventional policy as an economic bridge. Now, it has become a destination.”

“We have stumbled into very unhealthy co-dependences; co-dependences between central banks and investors, between central banks and debt issuers which are governments and companies, and between central banks and politicians,” 

“They are all in this unhealthy co-dependency. It’s like a bad marriage:

They’ve ended up relying on each other, and they just don’t know how to get out of it.””

Have a nice day!
Marty

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