As the 10-year to T-bill yield curve chart makes clear, we are not in Kansas anymore. We are in Wonderland and as you can see, in Wonderland interest rates and their interrelationships are at the center of events.
Last week the bullish case reasserted itself across financial markets, but to argue that policy makers are doing anything better than pumping future distortions into the system is crazy talk along the lines of 'the world is flat' or… ‘the above chart is flat’.
Last week Ben Bernanke clarified for people that yes indeed the Fed will eventually taper its QE bond buying operation while making clear that Zero Interest Rate Policy (ZIRP) will remain as is. I think that the average market participant is starting to settle in and get comfortable with the terms of our 'Taper to Carry'(T2C) plan, which sees the banks benefiting from borrowing short and lending longer. Continue reading "Rates of Interest"