Central Bank Fantasyland And What May Finally End The Party

Tuesday, August 9, 2016
By Paul Martin

August 09, 2016

With worries increasing around the world, the central bank fantasyland may finally be coming to an end.

It was only last week that I started to pay attention to Japanese bond auctions but in light of the heightened volatility over the past week, I’m going to keep on paying attention. The 30 yr bond auction overnight was mixed as the bid to cover of 3.04 was below the one year average of 3.36 and the 30 yr yield closed up 2.3 bps to .44%, the most since early April. But, bonds with shorter maturities rallied on the day with the 10 yr yield lower by almost 4 bps to -.08%. The likely end of more interest rate cuts deeper into negative central bank fantasyland and major logistical limits reached in the purchases of JGB’s makes the Japanese bond market right now a must daily watch and possible canary for the world’s sovereign bond markets notwithstanding the actions taken by other central banks…

The US NFIB small business optimism index for July was 94.6, basically unchanged with the 94.5 seen in June. The components were mixed again. Plans to Hire rose 1 pt after falling by 1 pt in June. Unfortunately, “job creation among small firms was negative for the 2nd straight month” but “on the bright side, slightly more owners this month’s said they plan to create jobs in the future…In fact, small business owners say that finding qualified workers is one of their most important business problems.” The NFIB went on to say that “the explosion of new regulations is a ball and chain for small business.”

The Rest…HERE

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