tag:blogger.com,1999:blog-5713178645208582139.post7838635873568389140..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: QE2 and Rising Yields, AgainDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5713178645208582139.post-80910818742068602662011-01-27T04:22:46.148-06:002011-01-27T04:22:46.148-06:00David,
I should have looked at the chart closer,b...David,<br />I should have looked at the chart closer,before commenting. I think what it shows is that the market is expecting a rate of inflation of around 2% for the next ten years. It's a start, but I don't think it is enough to stimulate growth to the point where unemployment will be impacted positively. You could argue that the results are attributable to QEII.It will be interesting nanutehttps://www.blogger.com/profile/04526158764171117978noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-77603574096881056902011-01-26T23:57:56.703-06:002011-01-26T23:57:56.703-06:00Nanute:
The bottom red line in the figure is the ...Nanute:<br /><br />The bottom red line in the figure is the real interest rate from TIPs. There are some liquidity premium issues with them, but for the most part the yield from TIPs securities are the bond market's ex-ante real interest rate. In the figure above, it is the 10-year real yield.<br /><br />On your second question, yes there are probably other factors contributing to its David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-6648331153135005812011-01-26T15:09:11.504-06:002011-01-26T15:09:11.504-06:00David,
Are you sure that real rates are rising? No...David,<br />Are you sure that real rates are rising? Nominal yes. Are they (nominal rates) exceeding the rate of inflation in the same time frame? And the question is whether we are seeing effects of monetary policy, or of external factors, such as a signal from the new fiscal policy makers that Congress is going to cut spending and possibly exacerbate the excess money demand disequilibrium? I nanutehttps://www.blogger.com/profile/04526158764171117978noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-84832396963314256472011-01-26T13:07:42.865-06:002011-01-26T13:07:42.865-06:00Jazzbumpa:
Good point on keeping a broader perspe...Jazzbumpa:<br /><br />Good point on keeping a broader perspective. Even if this is the beginning of an improving trend, something could still happen that pushes yields back down(e.g. Eurozone breaks up).David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-4292982692715184572011-01-26T13:05:01.308-06:002011-01-26T13:05:01.308-06:00David,
Real yields were heading down until late O...David,<br /><br />Real yields were heading down until late October, early November. This decline, as I understand was because of economic weakness. Thus, QE2 changing of real growth expectations did not occur until this time. If we use that starting point real yields have gone from around 0.50 bps to 1.22 bps. That's impressive. Of course, QE2 may not be the cause of that reversal.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-60310206184946388402011-01-26T12:48:22.754-06:002011-01-26T12:48:22.754-06:00David -
You are making too much of the last 12 mo...David -<br /><br />You are making too much of the last 12 months. I still say look at the long chart. Yields are well within a 30-year down-sloping channel (log scale.)<br /><br />To be meaningful, the yield must break out and stay out of the channel. It's way to early to tell. The channel bottom won't hit zero for at least another decade.Jazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-59190759641192220162011-01-26T12:20:23.588-06:002011-01-26T12:20:23.588-06:00Most agree that QE2 was signaled to markets by Ben...Most agree that QE2 was signaled to markets by Ben Bernanke in his late-August Jackson Hole speech. Since then, the change in real 10yr yields has been immaterial (about 14bps). <br /><br />What was the impact of QE2 on real 10yr yields? Perhaps two factors offset each other: on the one hand, QE2 helped finance an increase in net Treasury issuance (depressing yields); on the other hand, it David Pearsonnoreply@blogger.com