Since the federal funds rate hit 5% in March 2023, the bond market has been battling it out with the central bank. The market assumed that the US economy was heading for recession and required more accommodative monetary conditions. This negative outlook has been...

When Ronald Reagan said that the nine most dangerous words in the English language were “I’m from the government and I’m here to help,” he provoked a storm of protest from all sides of the political debate. Governments clearly can help drive competitiveness through...

The current market debate on interest rates has tended to focus only on the money rate of interest, and hence on when the Federal Reserve might start to cut short term rates. The idea is that a cut in rates will make money cheaper and therefore boost equities. Over...

The bond market remains confused about interest rates, which is why it continues to generate such unusual levels of volatility. One possible explanation for this ongoing uncertainty is that there is a fundamental difference of opinion between bond traders who have...

The last 6 months have been a boon for credit cycle investors who avoided significant losses arising from the fall in bond prices. The data has been clear for some time, however, that the market was mispricing bonds. See here and here. The market has now realised its...

A recent Odd Lots discussion with Austan Goolsbee, president of the Federal Reserve Bank of Chicago, raised an important philosophical question about the nature and level of interest rates. As Joe put it, why do we have to put up with mortgage rates at 8% if inflation...