(1) do not make absolutist statements without knowing the nature of the data; (2) Do not abuse statistical terminology; (3) do not assert a conspiracy is in place just because the data do not conform to your preferred narrative.
Author Archives: Menzie Chinn
Banking Turmoil: Deregulation vs. Monetary Profligacy (vs. Unanticipated Events)
I keep on hearing this refrain from people like former senator Toomey (on Bloomberg TV today) that the 2018 deregulation had nothing to do with SVB’s travails; rather its problems (presumably also Credit Suisse’s too) was due to monetary and fiscal profligacy. I thought it would be useful to recap the path of expected interest rates.
Yields, Spreads, and Uncertainty/Risk
Term spreads rising slightly, yields (nominal, real) down, and risk measures up.
Implied Fed funds Peak – from September to May
Using CME futures, from 1:30CT today:
Month-on-Month Core PPI at 0%
Undershoots consensus at 0.4%. M/M headline at -0.1 vs 0.3%.
Spreads and Uncertainty/Risk Measures Post-SVB, Post-CPI Release
Five year Treasury-TIPS breakeven rises. EPU up on 13th, VIX down (but still elevated) today. 10yr-3mo spread remains very negative.
Inflation Surprise Barely Moves Expected Fed Funds Path
M/M core CPI inflation surprised on the upside (0.5 ppts vs. 0.4 ppts Bloomberg consensus) while m/m headline at consensus. The path of the Fed funds as indicated by futures barely budged.
The Term Spread and Recession, Across Countries
World of Government Bonds has this interesting page which notes all the inverted yield curves. Shown below are those for S&P ratings of A to AAA as of today.
Economists in Favor of Banking Deregulation, 2017
Before the The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, what economists/analysts were in support of a loosening of requirements.
Guest Contribution: “Some Thoughts on SVB”
Today, we present a guest post written by Charles Engel, Donald D. Hester Distinguished Chair in Economics at UW Madison.