Given the employment surprise (NFP 266K actual vs. 978K expected, while GS forecasted 1300K), it would be remarkable if interest rates did not respond. Stock indices did drop, then recovered to pre-surprise trend. Five year bond yields did drop somewhat.
Category Archives: financial markets
Inflation Expectations, Post-Passage of the American Rescue Plan
At the end of the week, the five year constant maturity Treasury yield continued to rise along with the implied expected inflation rate; but after accounting for the estimated term premium and liquidity premium (h/t Bob), the increase in the latter since the Georgia elections is much more modest.
Are Market Expectations of Inflation Really Rising?
A typical market-based measure of expected inflation is the inflation breakeven calculated by subtracting the TIPS yield from Treasury yield at corresponding maturities. The breakeven spread is shown as the blue line in Figure 1.
Interest Rate Projections
The CBO recently released long term projections for Federal budget variables, including debt. These projections rely upon the assumed path of interest rates. Here, there is considerable uncertainty. Figure 1 presents the 10 year Treasury yield, and CBO projections at various dates.
Guest Contribution: “Central Bank Digital Currency: Some Macro-Financial Implications”
Today we are pleased to present a guest contribution written by Hongyi Chen, Senior Advisor at the Hong Kong Institute for Monetary and Financial Research, and Pierre Siklos, Professor of Economics at Wilfrid Laurier University. The views expressed here are their own and do not reflect the official opinions of Hong Kong Institute for Monetary and Financial Research or any other institutions the authors are affiliated with.
“The” Stock Market
If one wanted to assess price trends in “the” US stock market, which measure would one want to use?
No to: “the stock market which doubled under Trump”
There are many people whose brains are “data-free zones”, and this comment is one example of the resulting exposition.
Guest Contribution: “What the GameStop Bubble Says about Financial Markets”
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared at Project Syndicate.
Flash-mob finance
Modern communication infrastructure can facilitate swift simultaneous action by a large number of people. If used to coordinate a surprise attack, an organized mob can overcome a store or even the capitol building. Is Wall Street the next target?
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Guest Contribution: “The Impact of COVID-19 on Emerging Financial Markets”
Today, we are pleased to present a guest contribution by Steven Kamin (AEI), formerly Director of the Division of International Finance at the Federal Reserve Board. The views presented represent those of the authors, and not necessarily those of the institutions the authors are affiliated with.