By
Sampson Iroabuchi Onwuka
III Europe and U.S Bond Market
Yet we are aware of the relationship between European Bond and U.S Bond Market, where as one is exercisable at maturity with, or without interference from the general market (long-term bias), the other, the U.S Bond Market leaves us with an alternative. If there is any penny from the Bond can be made, it must be come within the changes in interest rate or in some cases changes or fluctuation in denominated currencies.
For how could the Feds easily expect a parallel shift to manifest in yield to earn (debt) between the current adverse buying and low interest rates going forward and the prospects of a recovery that will not likely benefit all asunder and meet market expectations. But then there is the reasonable gap between U.S Stock market and the Bond Market, in terms like this, we can almost certainly say that the Charts will prove that the Yields on either of part of the money house is only affects a fraction of each other. This has always been the case with U.S markets saving for the more concern fact that it mirrors the confidence level; general market-rate confidence, which is notionally a determined by a Var (Value at Risk) or a BVar, meaning that U.S Bond yields are narrow - not small thanks to Bernanke, but the markets and the overall U.S economy is also doing better expected and U.S low rates may or may longer benefit old economy or create a new one.
It is common sense that not all Bond in U.S is sensitive to interest rate, but we may show that all the majority of the global macro has a low to negative rates, particularly the G-7. and and for this, the sensitive notions of Interest Rate is a capital R.
Sampson Iroabuchi Onwuka
Alan Greenspan is an an accomplished American in all classes of respect and decorum. He is one of the few experts on American economy who is taken seriously. He was the Chairman of U.S Federal Reserve from 1987-2006, and has authored several essays on the role of Federal Reserve in U.S economy and in a recent 'Age of Turbulence' he was able to cast doubt over the future of U.S Federal Reserve, a theme that Paul Volcker recently echoed that we know expect the Feds to do too much.
In a recent June 7th 2013 commentary on the Federal Reserve $85 Billion a month Bond Purchase, he argued that it was notional for the Feds to 'Taper' off and that it will happen. But the sooner it happens, the better for all of us. That given the width in the Balance Sheet, "The Sooner we come to grips with this excessive level of assets and balance sheet of the Federal Reserve, which everyone agrees is excessive, the better"
He also mentioned that "Fed induces long-term rates to fall, it creates a buffer for shock prices to risk, but there are so many other forces at play here". This statement has also been taken to mean that the instruments necessary for financial recoveries of seriously over-exposed Reserve is not well tested or adequate to accommodate the level of tolerance exercised by keeping the rates Low, a theme and policy that the FED's today and Operational Risks associate with the symptom of uncertain recovery of U.S economy.
His concern is not if the Federal Reserve will taper of the buying streak and if even when, but if the Federal Reserve will buckle its belt when its the balance sheet gradually narrows. This has been taken to mean that the Federal Reserve should not rely so much of the rates as a way to recover or should it mean that they have enough revenue base to tolerate the excessive balance sheet gap.
Alan Greenspan may not kidding about the current financial instruments and reassures with elan that "Markets are always artificial in one sense. They have a wonderful capability of getting rid of the artificiality" In essence, Market is really one factor that correct itself, for instance, the debt owed to sector or the retraction from debt, may be subject to market forces outside our control. All of these may be considered a general theory of U.S economy and its operational dynamic, it may throw light on the need to react that Deflation is not out-of-question yet, yet, when we fully grasp the exuberance of the market.
II Bond Market
The Main event of Alan Greenspan's Discourses on CNBC is his concern "...that bond prices have got to fall, and long-term rates got to rise. And the problem which is going to confront is we haven't a clue as to how rapidly that's going to happen, and I think that we must be prepared for a much more rapid rise than is contemplated in the general economic outlook of all the people with whom I talk".
This aspect of Greenspan's discourses on the U.S Federal Reserve is the more revealing of his general concerns about the Fed's buying activity. The word which we are not hoping to add is called liabilities (short term) which on a short term a Federal Reserve may be immune to, but from this vintage to asset (long-term) raises the problems of 'open positions'. But who said that the Feds are immune?
In a recent June 7th 2013 commentary on the Federal Reserve $85 Billion a month Bond Purchase, he argued that it was notional for the Feds to 'Taper' off and that it will happen. But the sooner it happens, the better for all of us. That given the width in the Balance Sheet, "The Sooner we come to grips with this excessive level of assets and balance sheet of the Federal Reserve, which everyone agrees is excessive, the better"
He also mentioned that "Fed induces long-term rates to fall, it creates a buffer for shock prices to risk, but there are so many other forces at play here". This statement has also been taken to mean that the instruments necessary for financial recoveries of seriously over-exposed Reserve is not well tested or adequate to accommodate the level of tolerance exercised by keeping the rates Low, a theme and policy that the FED's today and Operational Risks associate with the symptom of uncertain recovery of U.S economy.
His concern is not if the Federal Reserve will taper of the buying streak and if even when, but if the Federal Reserve will buckle its belt when its the balance sheet gradually narrows. This has been taken to mean that the Federal Reserve should not rely so much of the rates as a way to recover or should it mean that they have enough revenue base to tolerate the excessive balance sheet gap.
Alan Greenspan may not kidding about the current financial instruments and reassures with elan that "Markets are always artificial in one sense. They have a wonderful capability of getting rid of the artificiality" In essence, Market is really one factor that correct itself, for instance, the debt owed to sector or the retraction from debt, may be subject to market forces outside our control. All of these may be considered a general theory of U.S economy and its operational dynamic, it may throw light on the need to react that Deflation is not out-of-question yet, yet, when we fully grasp the exuberance of the market.
II Bond Market
The Main event of Alan Greenspan's Discourses on CNBC is his concern "...that bond prices have got to fall, and long-term rates got to rise. And the problem which is going to confront is we haven't a clue as to how rapidly that's going to happen, and I think that we must be prepared for a much more rapid rise than is contemplated in the general economic outlook of all the people with whom I talk".
This aspect of Greenspan's discourses on the U.S Federal Reserve is the more revealing of his general concerns about the Fed's buying activity. The word which we are not hoping to add is called liabilities (short term) which on a short term a Federal Reserve may be immune to, but from this vintage to asset (long-term) raises the problems of 'open positions'. But who said that the Feds are immune?
Allan H. Meltzer 'A History of the Federal Reserve; 1913' presents us with the argument that so of favor both parties, and in terms of Bernenke's recent economic low rates, Meltzer mentioned that "Historically low nominal interest rates if the early postwar years, and the confined negative real long term rates from 1946 to 1949, show that monetary policy - measured by the growth rate of money - was not important even at the prevailing interest rates" This goes to suggest that the role of Interest rate in governing a nation should not be that sensitive.
Yet a second branch of the saying by Meltzer tended to support Greenspan's theory that "Relative prices, including stock prices, and prices of existing real assets continued to respond to current and prospective rates of money growth and inflation." As such the Conundrum can not on one hand be reduced to a question of Interest Rate, on the hand, can not exactly be demonstrated as a system that might slow the uncertain nature of market recovery.
In essence, the market from both sides of the houses, should be looking at both Long and Short terms, yet the numbers can speak for themselves that as Meltzer maintained that "Long term rates at Treasury Bonds at 2.5 percent, fix short term rates and not the pattern by rates prevailing at the time."
In essence, the market from both sides of the houses, should be looking at both Long and Short terms, yet the numbers can speak for themselves that as Meltzer maintained that "Long term rates at Treasury Bonds at 2.5 percent, fix short term rates and not the pattern by rates prevailing at the time."
III Europe and U.S Bond Market
Yet we are aware of the relationship between European Bond and U.S Bond Market, where as one is exercisable at maturity with, or without interference from the general market (long-term bias), the other, the U.S Bond Market leaves us with an alternative. If there is any penny from the Bond can be made, it must be come within the changes in interest rate or in some cases changes or fluctuation in denominated currencies.
For how could the Feds easily expect a parallel shift to manifest in yield to earn (debt) between the current adverse buying and low interest rates going forward and the prospects of a recovery that will not likely benefit all asunder and meet market expectations. But then there is the reasonable gap between U.S Stock market and the Bond Market, in terms like this, we can almost certainly say that the Charts will prove that the Yields on either of part of the money house is only affects a fraction of each other. This has always been the case with U.S markets saving for the more concern fact that it mirrors the confidence level; general market-rate confidence, which is notionally a determined by a Var (Value at Risk) or a BVar, meaning that U.S Bond yields are narrow - not small thanks to Bernanke, but the markets and the overall U.S economy is also doing better expected and U.S low rates may or may longer benefit old economy or create a new one.
It is common sense that not all Bond in U.S is sensitive to interest rate, but we may show that all the majority of the global macro has a low to negative rates, particularly the G-7. and and for this, the sensitive notions of Interest Rate is a capital R.
The Bank of England monetary policy committee and June dates, Bank of England ECB, left their official Bank rates unchanged at 0.5%. Mario Draghi and ECB in statement on June 7th, 2013, also released the ECB resolution that "...the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.5% and 0.00% respectively."
It is generally true that a relationship between between spot and forward rate is determined by the relative interest of two countries and this relationship forces the 'forward discount 'to another party. For instance, Europe, particularly British pounds historically trade at 'forward discount' to the dollars, but when we have a near flat curve with upward tendency, both parties are pretty much compelled to 'un-exercise' their rights. The fact the 'yield to maturity' is interest rate based makes the equation quite difficult from the perspective of Federal Reserve which has has to respond to the domestic needs of the Americans, by staying at near zero.
The other more serious question is the baying concern of the American Greenbacks as a proven Money Order and how the West is expected to react to the growing financial gap between Americans and the rest, and the impact of US Debt ceiling on the triple A rated US Treasury.
Bank of Japan
Interest rates in Japan are lower in United States which are lower than interest rates in Britain and the main point is that the Americans are pretty lobbied to invest through buying Yen and we go forward. but because of the low interest of U.S at almost zero, it is impossible for Japanese Yen to cost any less going forward and in spite of the response from the Bank of Japan. If Yen is expensive, you are only likely to attract local investment and some of its in a high structure interest rate economy like Japan is not readily available, except for heavy financial injection from Bank of Japan who since April of this year agreed of aggressive injection of money. One little fact is that it may come down to simple things, which may give them a breathing chance and refocus if possible. But U.S like Europe s nursing an old wound.
In some measure, between the Japanese 'Stock prices' 'options maturity' 'instantaneous volatility from aggressive injection of money by Bank of Japan, and 'interest rate' the market risk and Var forward rates, may create a long time panic given the current confidence level in some areas are below 16% Standard Deviation. Killing of stocks to accommodate or attract American investment is desperate. At May/June stock calender, confidence level should be at the trade level of less 1% of Var
Bank of Israel
Stanley Fischer's Bank of Israel which until recently determines its interest rate through a median (aggregate) of the G-7 interest rate, in a recent diet of the Governors of Bank of Israel, hinted that the sky-rocket housing inflation index to income (value to earning) was the determinative for 'quantitative easing' beginning from June end of 2013. Bank of Israel has a 14 day disclosure date and by circumstance serve as a clearing Bank for many International Markets and BRIC Nation. Interest rate of Bank Israel is marginally dependent on the performance of EuroBanks, which is usually lower to US.
IV
What exactly is expected from this saying by Greenspan, that "...bond prices have got to fall, and long-term rates got to rise"? The central fix of this useful concern is derived from the day I impact of a change in the Interest rate. It is no secret that the current Fed's Reserve Chairman and the Policy makers, has maintained a near zero percent interest rate for over 24 months. It is poised to maintain the rate for sometime until they are sure that their target - however arbitrarily - is met.
One fact that should govern the view point of the Greenspan regarding the 'taper' is that enough money is supposedly in circulation as of today and a holier than thou approach of Banks with retailers should not replace the fact that individuals citizens are still adjusting to the shocks from 2008. But is of course if not where the problem with the Feds is associated with, a shift interest rates may or may not necessarily benefit the economy, which also means that the process is in of itself a strange endorsement of power at the top of level.
One more caveat on this seeming FEDS indifference we may suggested with a reference to a commentary on U.S economy by G. William Dornhoff; University of California, - which appeared - that "In the United States Wealth is highly concentrated in relatively few hands. As of 2007 the top 1 percent of households (the Upper Class) owned 34.3 percent of all privately held wealth, and the next 19% (the managerial professional, and small business stratum) had 50.3 percent, which means that just 20 percent of the people owned a remarkable 85 percent, leaving only 15 percent of the wealth for the bottom 80 percent (Wage and Salary Workers). In terms of financial wealth (total net worth minus the value of one's house), the top 1 percent of households had an even greater share of 42.2 percent"
Bernanke and Black Banks.
The main event associated with Bernanke's move is that individual home owners are mainly fixed income earners and a low interest rate offers these people a chance of a lifetime to acquire and adjust to new avenues of by .....but using some of the examples associated with minority Banks, particularly Black Banks, that mainly participate in zip codes and exist with due respect to grants from Federal Housing Authority (FHA-HUD) programs for financing hosing loans, these Black Banks reliant on these types of programs have mainly gone under.
Although it is not the role of the Federal Bank to do the Job of the Government, but it is common sense that waiting for the Job numbers to reach a certain targeted level before profit bearing interest rates are initiated, the concern of the Federal Reserve in this case will not be any different from Government programs that earned to stem the Banks that has very thin liquid base.
In some respect, there is some measure of wisdom from experience in Greenspan, that we can not always expect the market to meet our expectations or keep up with the buying of Government Treasuries in spite of the low numbers from the market. In another language, there is a thin line between the Job of the Feds which is to maintain a balance of liquidity between Banks and the individual consumers and the Policies of the Federal Government to attract the investment of Banks who the Feds are pretty much preventing from investing U.S Treasury Bills. It however becomes overtime a question of Charity.
Black are involved or directly affected by the Market. it usually takes a while for the interest rate change to impact the Economy but the change in the rates can have direct parallel impact on the U.S market. In reality, a drain on 'public money' forces asset to plunge in value 'deflationary' and in terms of Bond and respective parties, at least they have the option of keeping
When fixed interest rate rise, fixed income bonds lose 'value', returns going forward shed in value and one way to Hedge against it, is low interest rate. This statement should be followed by the argument that If Banks Hedge their exposure, increase or changes in interest rate will not necessarily or directly impact on the Banks. These Banks which make a sizable percentage of the Federal Reserve or until recently FDIC Insured, will have the time to adjust to these changes by the Federal Reserve and convert their fixed rates into variable rates. Until recently only insured Banks can fully participate in retail business.
A bet on the changes in interest rate becomes important since there are several interesting parties toying with Collateralize Debt, and such private or profit motivated financial instrument forces into account extreme cases of put option and sometimes stand alone, it becomes less surprising when it incurs the pressure to deliver on a bond with peculiar attentions on the interest rate, or a race towards the decline of the value of a Government Bond and in this instant, an interest rate increase. Let us state that this scenario is borrowed from academic examples and not necessarily how it operates in real time.
IVb
However, Government Bonds are usually risk-less or have little volatility and in many cases, they attract 'semi-automatic Banks', either tied to an external economic of scales such as Chinese Banks and Government or once like the so called Black Banks who were once criticized for "...for holding a large percentage of their assets in highly liquid investments, primarily U.S Government Obligations" (Bates, et al).
Although Timothy Bates was merely responding to the allegations from Brimmer, A.F, 'Black Banking', we may indicate that Brimmer statement at the Federal Reserve concludes that "If, as has been charged, Black Banks are conservative institutions preferring risk-less government bonds and bills to holding of business and household loans then, they may, in fact, be largely incapable of helping to finance the development of their communities".
From this vintage, we can widen that the reasons why Banks should not be encouraged to rain in the resources and instrument from risk-free investment, and should also be discouraged from such exercise will amount to parking one's money at a highly rewarding Bond market which drains on the Public and may lead to deflation like Japan of recent months, with or without respect to credit. Banks are not Government owned and are necessarily Banks for profits, as such other tactics are necessary given the Bank's role in income distribution and credit.
Robert J. Yancy 'The Federal Government and Black Enterprises'; 74' "In 1971 the assets of the nation's majority Banks were $700 Billion while the assets of minority banks were $600 million. Nevertheless, minority banks granted $60 million in business loans to minorities while majority banks granted $150 million in business loans to minorities. Thus, while minority banks had assets of less than one percent of the nation's total banks assets, they accounted for more than 29 percent of the business loans made to minorities"
It is generally true that a relationship between between spot and forward rate is determined by the relative interest of two countries and this relationship forces the 'forward discount 'to another party. For instance, Europe, particularly British pounds historically trade at 'forward discount' to the dollars, but when we have a near flat curve with upward tendency, both parties are pretty much compelled to 'un-exercise' their rights. The fact the 'yield to maturity' is interest rate based makes the equation quite difficult from the perspective of Federal Reserve which has has to respond to the domestic needs of the Americans, by staying at near zero.
The other more serious question is the baying concern of the American Greenbacks as a proven Money Order and how the West is expected to react to the growing financial gap between Americans and the rest, and the impact of US Debt ceiling on the triple A rated US Treasury.
Bank of Japan
Interest rates in Japan are lower in United States which are lower than interest rates in Britain and the main point is that the Americans are pretty lobbied to invest through buying Yen and we go forward. but because of the low interest of U.S at almost zero, it is impossible for Japanese Yen to cost any less going forward and in spite of the response from the Bank of Japan. If Yen is expensive, you are only likely to attract local investment and some of its in a high structure interest rate economy like Japan is not readily available, except for heavy financial injection from Bank of Japan who since April of this year agreed of aggressive injection of money. One little fact is that it may come down to simple things, which may give them a breathing chance and refocus if possible. But U.S like Europe s nursing an old wound.
In some measure, between the Japanese 'Stock prices' 'options maturity' 'instantaneous volatility from aggressive injection of money by Bank of Japan, and 'interest rate' the market risk and Var forward rates, may create a long time panic given the current confidence level in some areas are below 16% Standard Deviation. Killing of stocks to accommodate or attract American investment is desperate. At May/June stock calender, confidence level should be at the trade level of less 1% of Var
Bank of Israel
Stanley Fischer's Bank of Israel which until recently determines its interest rate through a median (aggregate) of the G-7 interest rate, in a recent diet of the Governors of Bank of Israel, hinted that the sky-rocket housing inflation index to income (value to earning) was the determinative for 'quantitative easing' beginning from June end of 2013. Bank of Israel has a 14 day disclosure date and by circumstance serve as a clearing Bank for many International Markets and BRIC Nation. Interest rate of Bank Israel is marginally dependent on the performance of EuroBanks, which is usually lower to US.
IV
What exactly is expected from this saying by Greenspan, that "...bond prices have got to fall, and long-term rates got to rise"? The central fix of this useful concern is derived from the day I impact of a change in the Interest rate. It is no secret that the current Fed's Reserve Chairman and the Policy makers, has maintained a near zero percent interest rate for over 24 months. It is poised to maintain the rate for sometime until they are sure that their target - however arbitrarily - is met.
One fact that should govern the view point of the Greenspan regarding the 'taper' is that enough money is supposedly in circulation as of today and a holier than thou approach of Banks with retailers should not replace the fact that individuals citizens are still adjusting to the shocks from 2008. But is of course if not where the problem with the Feds is associated with, a shift interest rates may or may not necessarily benefit the economy, which also means that the process is in of itself a strange endorsement of power at the top of level.
One more caveat on this seeming FEDS indifference we may suggested with a reference to a commentary on U.S economy by G. William Dornhoff; University of California, - which appeared - that "In the United States Wealth is highly concentrated in relatively few hands. As of 2007 the top 1 percent of households (the Upper Class) owned 34.3 percent of all privately held wealth, and the next 19% (the managerial professional, and small business stratum) had 50.3 percent, which means that just 20 percent of the people owned a remarkable 85 percent, leaving only 15 percent of the wealth for the bottom 80 percent (Wage and Salary Workers). In terms of financial wealth (total net worth minus the value of one's house), the top 1 percent of households had an even greater share of 42.2 percent"
Bernanke and Black Banks.
The main event associated with Bernanke's move is that individual home owners are mainly fixed income earners and a low interest rate offers these people a chance of a lifetime to acquire and adjust to new avenues of by .....but using some of the examples associated with minority Banks, particularly Black Banks, that mainly participate in zip codes and exist with due respect to grants from Federal Housing Authority (FHA-HUD) programs for financing hosing loans, these Black Banks reliant on these types of programs have mainly gone under.
Although it is not the role of the Federal Bank to do the Job of the Government, but it is common sense that waiting for the Job numbers to reach a certain targeted level before profit bearing interest rates are initiated, the concern of the Federal Reserve in this case will not be any different from Government programs that earned to stem the Banks that has very thin liquid base.
In some respect, there is some measure of wisdom from experience in Greenspan, that we can not always expect the market to meet our expectations or keep up with the buying of Government Treasuries in spite of the low numbers from the market. In another language, there is a thin line between the Job of the Feds which is to maintain a balance of liquidity between Banks and the individual consumers and the Policies of the Federal Government to attract the investment of Banks who the Feds are pretty much preventing from investing U.S Treasury Bills. It however becomes overtime a question of Charity.
Black are involved or directly affected by the Market. it usually takes a while for the interest rate change to impact the Economy but the change in the rates can have direct parallel impact on the U.S market. In reality, a drain on 'public money' forces asset to plunge in value 'deflationary' and in terms of Bond and respective parties, at least they have the option of keeping
When fixed interest rate rise, fixed income bonds lose 'value', returns going forward shed in value and one way to Hedge against it, is low interest rate. This statement should be followed by the argument that If Banks Hedge their exposure, increase or changes in interest rate will not necessarily or directly impact on the Banks. These Banks which make a sizable percentage of the Federal Reserve or until recently FDIC Insured, will have the time to adjust to these changes by the Federal Reserve and convert their fixed rates into variable rates. Until recently only insured Banks can fully participate in retail business.
A bet on the changes in interest rate becomes important since there are several interesting parties toying with Collateralize Debt, and such private or profit motivated financial instrument forces into account extreme cases of put option and sometimes stand alone, it becomes less surprising when it incurs the pressure to deliver on a bond with peculiar attentions on the interest rate, or a race towards the decline of the value of a Government Bond and in this instant, an interest rate increase. Let us state that this scenario is borrowed from academic examples and not necessarily how it operates in real time.
IVb
However, Government Bonds are usually risk-less or have little volatility and in many cases, they attract 'semi-automatic Banks', either tied to an external economic of scales such as Chinese Banks and Government or once like the so called Black Banks who were once criticized for "...for holding a large percentage of their assets in highly liquid investments, primarily U.S Government Obligations" (Bates, et al).
Although Timothy Bates was merely responding to the allegations from Brimmer, A.F, 'Black Banking', we may indicate that Brimmer statement at the Federal Reserve concludes that "If, as has been charged, Black Banks are conservative institutions preferring risk-less government bonds and bills to holding of business and household loans then, they may, in fact, be largely incapable of helping to finance the development of their communities".
From this vintage, we can widen that the reasons why Banks should not be encouraged to rain in the resources and instrument from risk-free investment, and should also be discouraged from such exercise will amount to parking one's money at a highly rewarding Bond market which drains on the Public and may lead to deflation like Japan of recent months, with or without respect to credit. Banks are not Government owned and are necessarily Banks for profits, as such other tactics are necessary given the Bank's role in income distribution and credit.
Robert J. Yancy 'The Federal Government and Black Enterprises'; 74' "In 1971 the assets of the nation's majority Banks were $700 Billion while the assets of minority banks were $600 million. Nevertheless, minority banks granted $60 million in business loans to minorities while majority banks granted $150 million in business loans to minorities. Thus, while minority banks had assets of less than one percent of the nation's total banks assets, they accounted for more than 29 percent of the business loans made to minorities"
U.S O.C.C
U.S O.C.C "Office of the Comptroller of the Currency" has often maintained that about 30% of U.S Commercial Banks Assets is 'Mortgage related', which includes 'Mortgages and Mortgage Backed Securities (MBSs). Since Mortgage plays a huge part in U.S economy and is part of business and credit market, it is only common that these Mortgage Related Assets should be generally or easily affected by the changes in U.S interest rate.
Given the sluggish to slow Job growth (Job Growth) and the problems associated with a recovery process, and the problems of 'Extension Risk' or delay of payment which shows up later in the history of U.S home owners,
April 27th 2013
“We have significant concerns regarding the misuse of deposit advance products,” said Comptroller of the Currency Thomas J. Curry. “The guidance today is an important step toward better protecting consumers and enhancing the safety and soundness of national banks and federal savings associations that may be offering similar products.”
Brain Hubbard
"Deposit advance products are small-dollar, short-term loans that a bank will make available to a customer who has recurring direct deposits with that bank. The deposit advance loan is to be repaid from the proceeds of the customer’s next direct deposit. These loans typically have high fees, are repaid in a lump sum in advance of the customer’s other bills, and often fail to consider the customer’s ability to repay the loan while still meeting other financial obligations."
"The OCC encourages national banks and federal savings associations to respond to customers’ short-term credit needs. However, deposit advance products can pose a variety of safety and soundness, compliance, consumer protection, and other risks. The guidance addresses how any bank offering the products may do so in a safe and sound manner without increasing its credit, compliance, legal, and reputation risks."
The 'Risk Curve'
It is said that when a stock in a given market forces a change in the yield curve that the stock/bond paradigm is a parallel shift. This market would be considered a risky asset and equity of investors are better placed or retained elsewhere. This market is also a Short term market associated mainly with badly exposed investment and poorly hedge instrument that generally affect a yield curve. A yield curve change with outward tendency may in effect
Parallel Shifts are not dissimilar from parallel markets, but are usually significant when there is a greater emphasis on price going forward 'implied' than underlying price.
Pricing is said to be a function of any Market and in less Volatile Government Bonds, for instance U.S bonds, Bond prices are Derived from its 'Present Value'. For this, changes in prices becomes inversely proportional to changes in Bond, and given a the prevailing term structure (for first world) interest rate plays a huge part of the anomaly.
In short put, price is a function of a market as derived from present value (given/quoted/agreed), and interest rate, at least in U.S and its Federal Reserve, may be reduced to the 'function of time to maturity'. If Y for instance is the Bond, a small placement or displacement of interest rate will price the cash at discount and may lead to repurchase agreement which is part U.S undoing in very recent time. Since the U.S Federal Reserve has agreed to enforce SWAP agreement and Basel III, then Leverages can have a determinant effect on the current. Crushing Leverages is also part of U.S undoing in 2008, but at low interest rate, some of these societies are officially taking adequate measures.
I doubt that Interest Rate of these countries - including United States will change in the next 60 days. Governments should be looking to find alternative ways of growing their economy with all due respect to Central Banks
U.S O.C.C "Office of the Comptroller of the Currency" has often maintained that about 30% of U.S Commercial Banks Assets is 'Mortgage related', which includes 'Mortgages and Mortgage Backed Securities (MBSs). Since Mortgage plays a huge part in U.S economy and is part of business and credit market, it is only common that these Mortgage Related Assets should be generally or easily affected by the changes in U.S interest rate.
Given the sluggish to slow Job growth (Job Growth) and the problems associated with a recovery process, and the problems of 'Extension Risk' or delay of payment which shows up later in the history of U.S home owners,
April 27th 2013
“We have significant concerns regarding the misuse of deposit advance products,” said Comptroller of the Currency Thomas J. Curry. “The guidance today is an important step toward better protecting consumers and enhancing the safety and soundness of national banks and federal savings associations that may be offering similar products.”
Brain Hubbard
"Deposit advance products are small-dollar, short-term loans that a bank will make available to a customer who has recurring direct deposits with that bank. The deposit advance loan is to be repaid from the proceeds of the customer’s next direct deposit. These loans typically have high fees, are repaid in a lump sum in advance of the customer’s other bills, and often fail to consider the customer’s ability to repay the loan while still meeting other financial obligations."
"The OCC encourages national banks and federal savings associations to respond to customers’ short-term credit needs. However, deposit advance products can pose a variety of safety and soundness, compliance, consumer protection, and other risks. The guidance addresses how any bank offering the products may do so in a safe and sound manner without increasing its credit, compliance, legal, and reputation risks."
The 'Risk Curve'
It is said that when a stock in a given market forces a change in the yield curve that the stock/bond paradigm is a parallel shift. This market would be considered a risky asset and equity of investors are better placed or retained elsewhere. This market is also a Short term market associated mainly with badly exposed investment and poorly hedge instrument that generally affect a yield curve. A yield curve change with outward tendency may in effect
Parallel Shifts are not dissimilar from parallel markets, but are usually significant when there is a greater emphasis on price going forward 'implied' than underlying price.
Pricing is said to be a function of any Market and in less Volatile Government Bonds, for instance U.S bonds, Bond prices are Derived from its 'Present Value'. For this, changes in prices becomes inversely proportional to changes in Bond, and given a the prevailing term structure (for first world) interest rate plays a huge part of the anomaly.
In short put, price is a function of a market as derived from present value (given/quoted/agreed), and interest rate, at least in U.S and its Federal Reserve, may be reduced to the 'function of time to maturity'. If Y for instance is the Bond, a small placement or displacement of interest rate will price the cash at discount and may lead to repurchase agreement which is part U.S undoing in very recent time. Since the U.S Federal Reserve has agreed to enforce SWAP agreement and Basel III, then Leverages can have a determinant effect on the current. Crushing Leverages is also part of U.S undoing in 2008, but at low interest rate, some of these societies are officially taking adequate measures.
I doubt that Interest Rate of these countries - including United States will change in the next 60 days. Governments should be looking to find alternative ways of growing their economy with all due respect to Central Banks
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