Use access key #2 to skip to page content.

Fed Raises Discount Rate... More "Unwind" in the Future?

Recs

12

February 18, 2010 – Comments (10)

Newest post from one of my new favorite sites

------------------------------------------

Fed Raises Discount Rate... More "Unwind" in the Future? - READ FULL ARTICLE
by Jake at econompicdata.blogspot.com

The Fed raised the Discount rate (not the Fed Funds rate) to 0.75% per Calculated Risk.

Just to be clear, this is the discount rate (this is the rate the Fed charges banks that borrow reserves) and not the Fed Funds rate. This move was being discussed for some time although the timing is a surprise.

Regardless, the bond market sold off in an expected, non-expected manner (nobody expected it today, but given the surprise hike shorter rates sold off more than longer rates in what would be an expected fashion).



ENLARGE

Why expected?

Short rates are more directly impacted (on a relative basis) by expectations of Fed hikes, whereas longer rates are more directly impacted (on a relative basis) by future rates, (thus expectations of inflation). This removal of liquidity from the system may mean the Fed is more likely to hike Fed Funds sooner (I don't buy that aspect of it), while inflation concerns may be less justified with less liquidity in the system.

What to expect now?

Besides the obvious answer "the unexpected", remember that renormalization following the unwind? Expect that unwind to be back in play.

10 Comments – Post Your Own

#1) On February 18, 2010 at 10:03 PM, Tastylunch (29.31) wrote:

I love jake's stuff, been following him for a couple years myself. :)

I think you'll really dig him Binve. His postin g style is concise and he often finds error sin publicly publsihed. I love it. :)

Report this comment
#2) On February 18, 2010 at 10:28 PM, binve (< 20) wrote:

Tastylunch,

Hey man! Yeah, he is awesome! His stuff is right up my alley / exactly the kind of stuff I like to read. I can't believe I never came across him before!.

Report this comment
#3) On February 18, 2010 at 10:37 PM, Tastylunch (29.31) wrote:

must be a freak thing man, cause I think you read sites that regularly link him.

Still you can't read them all

I've got over 400 feeds now and I think I better start chopping to make it more manageable.:)

Report this comment
#4) On February 18, 2010 at 10:53 PM, binve (< 20) wrote:

I've got over 400 feeds now and I think I better start chopping to make it more manageable.:)

LOL! I know exactly what you mean, I am in a similar boat :)

Report this comment
#5) On February 19, 2010 at 2:54 PM, outoffocus (23.15) wrote:

-We interrupt this love-fest between Binve and Tasty for the following announcement.-

This is the first time I've seen the market, commodities, and the dollar go up on the same day.  I don't know what to make of it.

-You may now return to your regulary scheduled man-hug.-

Report this comment
#6) On February 19, 2010 at 3:04 PM, binve (< 20) wrote:

outoffocus,

-We interrupt this love-fest between Binve and Tasty for the following announcement.-

LOL!!!

This is the first time I've seen the market, commodities, and the dollar go up on the same day.  I don't know what to make of it.

I have been watching it and am *deeply* suspicious of it. Problem is, I can't tell which one is lying!! (I suspect stocks, but we will see)

-You may now return to your regulary scheduled man-hug.-

Tasty, get over here you big brute!! ... yikes.... :)..

Report this comment
#7) On February 19, 2010 at 3:42 PM, USNHR (31.55) wrote:

#3) #4)

One of you should but a Blog out with the Best feeds on it. or both of you.

Report this comment
#8) On February 19, 2010 at 4:36 PM, outoffocus (23.15) wrote:

I have been watching it and am *deeply* suspicious of it. Problem is, I can't tell which one is lying!! (I suspect stocks, but we will see)

I think its the dollar.

Report this comment
#9) On February 19, 2010 at 8:44 PM, Tastylunch (29.31) wrote:

outoffocus

I thought all young kids were usin the term "bromance" :)

Re: your other question- if I knew that I wouldn't be on CAPS. :)

My personal guess is that commodities now trade on China, the dollar still trades on the Fed and the market is a little column a and little column b

chances are though that you are right.

USNHR

that's not  a bad idea,I've got about three blogs queued up in my head  but I'll see if I can get around that in teh next couple months. Might even help me out in what to decide in what to keep!

also EverydayInvestor had a legendary blog on this topic once, back when he was an actual investor and not a daytrader.

you might like this

http://caps.fool.com/Blogs/ViewPost.aspx?source=isesitlnk0000001&bpid=61889&mrr=0.50

Report this comment
#10) On February 19, 2010 at 10:08 PM, binve (< 20) wrote:

USNHR , That's a good idea!

outoffocus,

I think its the dollar.

Maybe :)

Tastylunch,

Isn't it bro-mantic ... (as Mel Torme softly sings)

... :)

Report this comment

Featured Broker Partners


Advertisement