Authored by Chris Hamilton via Econimica blog, Summary Federal Reserve holdings of Treasury's has risen for the first time since QE ended in 2014. Quantitative Tightening is over, but is outright QE back??? Ongoing "direct monetization" continues, with un-matched declines in Excess Reserves versus Fed held Treasury's and MBS. Interesting that this week, for the first time since QE ended way back in late 2014, Federal Reserve holdings of Treasury bonds rose (yellow columns, below). The $8 billion increase is the first seen since QE ended almost 5 years ago and comes after QT (quantitative tightening) had been decelerating since mid 2019. However, the outright increase in Treasury holdings is still a bit of shocker. Can't say if this was a one off... but this deserves a bit more attention. So what exactly was the Fed buying? Seven to ten year Treasury's! The chart below shows the Fed's mid duration holdings (red line) and the weekly change in those holdings (blue columns). The purchasing this week was only bested by a single week in 2011...when the Fed was feverishly running its QE program?!? After a long period of selling/rolling off mid duration Treasury's (red line below), late 2018 and early 2019 saw an end to the selling...and now a sudden burst of Federal Reserve purchasing coinciding with a sharp decline in the 10 year yield (shaded blue area). As for the shorter durations, the two charts below show the Fed's holdings of Treasury's under 1 year, and the 1 to 5 year holdings. No need to guess what the Fed is actively rolling off/selling. And the unchanging (nearly zero roll-off since 2016) Fed holdings of over 10 year Treasury debt. And the Feds long duration holdings versus the 30 year Treasury yield. The current move down in the long yield is exactly what was seen, in anticipation prior to QE1, QE2, and QE3. Hmmm. Charted below are the Fed Treasury holdings, by duration, since 2003 and the impact on the 10 year minus 2 year spread (shaded grey area). The real question isn't is QT ending, but is QE 4 actually already starting? Purple line are Fed held T-bills, red line 1 to 5 year duration, yellow line mid duration, and blue line is everything over 10 year duration. The fact the Fed has allowed nothing to roll off from the longest duration holdings sure is interesting. Below, ongoing declines in bank excess reserves versus far smaller declines in Fed held Treasury's and Mortgage Backed Securities. Some call this $700 billion and growing disparity "direct monetization", something the Fed said it would never do?!? And now that QT appears to be over, will bank excess reserves continue falling providing an unofficial QE (with banks leveraging up the direct monetizaton) alongside a potential restart of the Fed's QE? Why is this happening? In short, organic potential for growth has been decelerating for half a century but central banks and federal governments are unwilling (unable?) to accept what growth the economy can provide. They are instead artificially and synthetically pushing up economic growth and financial asset valuations. But every action has a reaction, and like Mother Nature, the more one messes with the economy, the greater the distortions become. Detailing the decelerating potential for organic growth, globally HERE and domestically HERE. Why this is the end of the positive interest rate cycle...HERE And why China is facing an existential crisis and has no possible means to compromise on a trade deal...HERE. EXTRA CREDIT - For those curious what the correlation of Federal Reserve Treasury buying to equity valuations has been...chart below is Fed Treasury holdings versus the Wilshire 5000 (representing all publicly traded US equities). When the Fed buys, stocks go up...when the Fed holds or sells, stocks struggle (except for 2017, but that's another story). Invest accordingly.
Recently, the IRS addressed whether premium seating upgrades (such as for premium economy seats) are subject to the air transportation excise tax.
The aim of the plant and algae t-shirt was to make a piece of clothing entirely out of natural materials so that once it reached the end of its lifespan it could simply return to nature and leave no trace.
Exclusive Sneak Peek: This 600-Foot-Long Expedition Vessel Is About To Become World’s Largest Superyacht
Azzam is about to lose its “world’s largest superyacht” title now that the 600-foot-long REV Ocean has just been launched from the VARD Tulcea shipyard in Romania.
Five new jewelry books that should be on your reading list for Fall 2019
Though he had been due in Asia for a scheduled tour to bolster support for relief from US sanctions, Iranian Foreign Minister Javad Zarif's plane made a surprise landing in Biarritz on Sunday, where the Group of Seven (G7) summit is in session. Amid speculation over the plane's unscheduled return to France, Iran's foreign ministry has now confirmed FM Zarif has arrived in Biarritz for talks at the French foreign ministry's invitation. However, "There won't be any meeting or talks with the American delegation," the statement said. The Iranian delegation plans to hold meetings on the sideline of the G7 summit, western diplomatic sources have also said. French President Emmanuel Macron will reportedly be involved in the sideline meetings, after he told reporters at the summit he plans to continue holding talks with Tehran in the coming weeks over Iran's nuclear program. Reports suggest Macron could press Trump for a resumption of the Iran oil waiver program. Image source: Reuters He and Zarif discussed moving forward just days ago in Paris. It also must be remembered that Zarif is currently under US Treasury department sanctions, and further it was recently revealed that last month Zarif had rebuffed a secret invitation to meet with President Trump in the oval office, which involved the mediation of Rand Paul. Currently, there's speculation over the possibility of Zarif or Iranian intermediaries engaging with US officials or even Trump himself on the sidelines of the summit. On Sunday Trump was asked about these rumors point blank, to which he responded, "no comment". Meanwhile, Zarif's unexpected presence could be part of a French initiative to press Washington for the resumption of the oil waiver program, which had allowed up to eight countries to continue importing Iranian crude on a conditional basis. French floating an initiative here at #G7Summit to resume waivers on some Iranian oil sales in return for Iran getting back in JCPOA, giving space for talks on missiles and the region. Devil in the details. They might get it past Trump, but what about Bolton, Khamenei and IRCG? — Julian Borger (@julianborger) August 25, 2019 Macron said on Sunday just as Zarif's plane touched down that G7 leaders "had a discussion yesterday on Iran and that enabled us to establish two common lines: no member of the G7 wants Iran to get a nuclear bomb and all the members of the G7 are deeply attached to stability and peace in the region," he said. As regional tensions again begin to soar over Israel's renewed spate of attacks on Syria, and now it appears unprecedented attacks on Iraq and now Lebanon, will France and Iran make a last minute effort to press Washington toward stabilizing the situation and find common ground? developing...
Here's everything you might have missed in boxing this weekend.
In a perfect world, a typical Sunday would be relaxing and refreshing – a true leisure day.
Weekend Box Office: Tarantino's 'Hollywood' Tops 'Basterds' As 'Spider-Man' Passes $1.1 Billion
'Good Boys' held well and should end near $70 million, as 'The Farewell' has now grossed $14.4 million.