The market now getting hit on Lower Yields !

[Sig]

Low yield or low interest rate is bad for so many things:

1. Banks hoarding a lot of cash that they can't lend out. Even with the extremely low interests.
2. Consumers have a lot of cash in the banks and do not spend. Bad for economy.
3. Businesses do not want to borrow since they are not confident of the near future and demand.
4. Foreign capital (FX reserves) have been staying in US treasuries as the safest reserve currency. But when the economic activities pick up, those reserve capital will flight out of US and this can cause rapid high rate scenario.
5. The extra low interest puts pressure on other financial assets like stocks.

I recall the same thing in 2008 with the previous QE. Fed injected a lot of capital and expected banks to lend out to support the housing market. But banks did not want to take the credit risks. So the capital stayed at the bank and some were used to trade stocks...

So you have @xandman calling me an "arrogant Jackass" when I ask him about his assertion that the Fed is propping up zombie firms, like GE apparently, because their low interest rates are allowing them to borrow apparently morally unacceptable levels of debt (https://www.elitetrader.com/et/thre...a-trillion-dollars.359373/page-2#post-5417271) But you're now saying low interest rates are bad because businesses don't want to borrow. Which anti-fed voice am I meant to listen to, you all need to get together and get your stories straight

 

[Overnight]

"The market now getting hit on Lower Yields!"

Well, that lasted for all of a day. Markets back at ATH. AGAIN.

 

[kmiklas]

Drilling into your second link, to https://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab3 the Fed has actually decreased it's holdings of fixed income securities and MBS holdings are flat since the end of June. Where do you get that "120B/month into the Fixed Income and Mortgage markets" number from, specifically?

Fed Balance Sheet
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

Since last year, the Fed has held its key overnight interest rate near zero and has been buying at least $120 billion a month of Treasury and mortgage bonds. Its goal is to fuel the economy’s recovery by providing cheap credit.

https://www.wsj.com/articles/inflat...s8zhypvb5iq&reflink=desktopwebshare_permalink

At issue are $80 billion worth of Treasury securities and $40 billion worth of mortgage-backed securities the Fed will continue to buy each month until it decides to tighten its pandemic-induced, accommodative monetary policy.

https://www.spglobal.com/marketinte...conomic-vaccination-goals-fall-short-63773209

 

[Sig]

Fed Balance Sheet
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm


https://www.wsj.com/articles/inflat...s8zhypvb5iq&reflink=desktopwebshare_permalink


https://www.spglobal.com/marketinte...conomic-vaccination-goals-fall-short-63773209

So the OP specifically asked about the difference between "a few weeks ago" and today and you specifically stated that the answer to that was "The Fed is pumping 120B/month into the Fixed Income and Mortgage markets". The data I listed definitively showed that the Fed decreased it's holdings of fixed income securities and kept MBS holdings flat since the end of June. If you think I'm reading that wrong, please let me know?

The information you're providing either generally refers to a period ranging back to the beginning of the year (one dates from April!) or refers generically to the Fed's balance sheet or their purchase of Treasuries. It is not reflective of the specific areas you claim during the specific time the OP asked about.

I say this in the nicest possible way based on my own experience where I've been guilty of this myself: Based on this post and earlier conversations we've had over previous weeks, it appears that you made a bad bet that inflation was going to take off. Instead of looking at what mistakes you made and what you can learn from that, it's much easier to find an external foil and blame it all on them. That makes us feel better, but it doesn't help us learn and grow. I know I personally brought up several points to you in past weeks where I pointed out possible faults in the way you were thinking about rates and inflation, as did several other posters. Instead of just "blame the Fed", it would probably serve your future success much better if you went and reread those threads, figured out what kind of thought process those who warned you about this were using, and think about what your blind spots are and how you might be able to incorporate some of those more successful thought processes into your own heuristics.