Controlling the Curve

Brief Update on the COVID-19 Gripping Hand
Blunt Instruments
Zero Bound
“A Nasty Repricing Event”
White Papers, Where Do You Hide, and Finding Income

If time is money, then interest rates are the price of time. The most important interest rates in the world are for US Treasury securities. This is why I’ve long said it makes no sense for a committee to set those rates. The markets could do just fine without that help, thank you. But the Federal Reserve’s Open Market Committee arbitrarily decides the overnight Federal Funds rate. And lately, it doesn’t stop there.

Like the proverbial frog in a boiling pot, we are slowly being conditioned to accept this as normal. The warm water feels good at first. We think we can hop out in time. It’s not clear we can. And it’s not just the Fed. Central banks all over the world are turning the heat up on the various currency pots.

Today I want to discuss an arcane-sounding but incredibly important term you need to know: Yield Curve Control. Several central banks are already using it and I see a strong possibility the Fed will join them. But first we must again consider the Gripping Hand.