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The US jobs number just came out and the figures were quite good. Two-year yields spiked on the news.
In the next recession, muni bonds will be hit and local governments will default. The Fed will use Section 13(3) of the Federal Reserve Act to buy municipal paper. And if they need even more authority, Congress will grant it.
Many US public sector pension funds are underfunded. This will impact local governments' solvency in the next downturn. It could also threaten the safety and security of the municipal bond market. So the Fed may end up playing a role.
Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered…
The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates…
The consensus for the March jobs report is for an addition of 178,000 jobs. The unemployment rate is expected to remain unchanged at 4.7%. Other data show the risk is to the upside here.
What about running down the balance sheet — reverse QE if you will? I think this is where the Fed minutes offered some new thinking.
I think I have the answer to at least one question: why was the Fed talking to big money investors in the first place. My thoughts follow below.
If you look at the difference in yield between 2 and 10-year treasuries, the numbers in the last year are the lowest since 2008, when the US economy was in a recession.