The hottest Interest Rates Substack posts right now

And their main takeaways
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Top Finance Topics

Note on Monetary Policy and Jackson Hole

Erdmann Housing Tracker • 126 implied HN points • 25 Aug 23
💰 Finance Interest Rates
  1. Powell's approach to monetary policy is based on conventional models, which may not fully address current economic issues.
  2. There is a concern that inflation is settling above the 2% target due to trends in goods and services.
  3. Housing supply issues contribute to 'inflation' and can be misleading when analyzing monetary policy impacts.

No, I don't think the Fed drives future yields

Erdmann Housing Tracker • 105 implied HN points • 05 Oct 23
💰 Finance Interest Rates
  1. Forward interest rates are mainly driven by changing economic productivity and sentiment, with the Fed playing a secondary role.
  2. Market sentiment about real future economic activity has a significant impact on interest rates.
  3. Most of the changes in long-term bond yields since 1989 have occurred during Federal Open Market Committee meetings.

The Fed Has Stopped Pretending that Price Inflation Is Going Away

QTR’s Fringe Finance • 23 implied HN points • 17 Feb 25
💰 Finance Interest Rates
  1. The Federal Reserve recently cut interest rates, claiming confidence in lower inflation, but that confidence seems to have faded. The Fed is now uncertain about its inflation goals.
  2. Inflation remains high, especially for everyday necessities like food and housing, causing consumers to struggle with rising costs. Recent data shows that inflation is not improving as expected.
  3. Instead of lowering interest rates, which may not help ordinary people, the Fed should step back and allow the market to adjust naturally. This could help stabilize the economy and provide better opportunities for regular investors.

Forward Guidance

The Last Bear Standing • 133 implied HN points • 03 Mar 23
💰 Finance Interest Rates
  1. The Dot Plot is the Fed's way of showing where they think interest rates will go in the future.
  2. Yield Curve Control is when central banks adjust short-term and long-term rates to tackle inflation and maintain financial stability.
  3. The Fed's Dilemma involves trying to raise rates to tackle inflation while avoiding destabilizing long-duration assets and maintaining financial stability.
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Economic Calendar for the Week of November 4th, 2024

Alex's Personal Blog • 32 implied HN points • 04 Nov 24
💰 Finance Interest Rates
  1. This week has a packed economic calendar with important earnings reports coming from big companies like New York Times and Qualcomm.
  2. The U.S. elections are on Tuesday, which could distract from other economic updates but are still very important.
  3. Thursday is crucial as the Federal Reserve will announce their decision on interest rates, along with jobless claims data and several company earnings.

Money Supply Growth Accelerates And Hits A 27-Month High

QTR’s Fringe Finance • 24 implied HN points • 16 Jan 25
💰 Finance Interest Rates
  1. The money supply in the economy is growing rapidly, reaching a high not seen in over two years. This growth is mainly driven by government spending rather than strong economic conditions.
  2. Interest rates are being pushed down by the Federal Reserve to help manage the government's large debt. This could lead to future inflation as more money is created to handle increasing deficits.
  3. Despite recent economic growth, many believe it isn't based on solid foundations. The reliance on government spending and credit could pose risks for the economy moving forward.

O Bubble, Where Art Thou?

The Last Bear Standing • 55 implied HN points • 08 Mar 24
💰 Finance Interest Rates
  1. The equity market has shown signs of over-indulgence recently, with increasing enthusiasm and unbridled momentum.
  2. Market worry has shifted from lack of enthusiasm to lack of disbelief, raising concerns about the sustainability of the current bull run.
  3. The macroeconomic resilience is attributed to a balance between big fiscal policies, monetary tightening, and strong balance sheets post-pandemic.

Lawler: Early Read on Existing Home Sales in November

CalculatedRisk Newsletter • 23 implied HN points • 17 Dec 24
💰 Finance Interest Rates
  1. Existing home sales increased in November, reaching an annual rate of 4.09 million. This is a 3.3% increase from October and 4.6% higher than last November.
  2. The median price for existing single-family homes went up by about 5.3% compared to last year. This suggests a growing demand in the housing market.
  3. There is ongoing discussion about the 'neutral' interest rate, which affects how restrictive monetary policy is. Recent economic growth may lead to higher estimates of this rate among officials.

ICE Mortgage Monitor: Refinance Activity Increased Especially for Rate/Term Refinances

CalculatedRisk Newsletter • 23 implied HN points • 09 Dec 24
💰 Finance Interest Rates
  1. Refinance activity surged in September and October, with over 300,000 borrowers taking advantage of lower interest rates. This was the highest refinance volume in 2.5 years.
  2. Mortgage delinquencies decreased slightly in October, dropping below pre-pandemic levels. However, serious delinquencies are still slowly rising year over year.
  3. Home prices saw a small increase in October, with growth edging up to 3.0%. But there are signs that this rate might soften again soon due to rising interest rates and potential demand pullbacks.

Why Are Mortgage Rates Rising?

Spilled Coffee • 24 implied HN points • 23 Oct 24
💰 Finance Interest Rates
  1. Mortgage rates are influenced by the 10-Year Treasury Yield, which reacts to the economy's growth and inflation expectations. Even though the Fed cut interest rates, mortgage rates have actually gone up because of the rising Treasury Yield.
  2. Currently, the 30-Year Fixed Mortgage rate is at 7.26%, the highest since July, showing a steady rise despite expectations for a decrease. This rise has persisted for four consecutive weeks.
  3. High mortgage rates and low affordability are causing home sales to decline significantly, with September recording the lowest closed sales of existing homes since 2012. Mortgage applications also dropped sharply, indicating a cooling housing market.

More on the Fed and Long-Term Interest Rates

Erdmann Housing Tracker • 63 implied HN points • 17 Oct 23
💰 Finance Interest Rates
  1. The Fed's impact on interest rates may not be as significant as perceived, with most rate changes occurring outside of Fed meetings.
  2. Changes in long-term interest rates are likely not correlated with new information from Fed meetings.
  3. Interest rate changes during Fed meetings appear independent of changes outside of meetings, indicating that market expectations are already adjusted before meetings.

March 2024 Fed Meeting Preview

Erdmann Housing Tracker • 42 implied HN points • 19 Mar 24
💰 Finance Interest Rates
  1. Consider using NGDP growth to communicate monetary policy instead of targeting inflation with short term interest rates.
  2. The yield curve's dynamics indicate recessionary signals and potential rate cuts by the Fed.
  3. Economic growth predictions for 2024 suggest low inflation, steady GDP growth, and a possible decrease in target rates by the Fed.

Why are homebuilder rate buydowns effective?

Erdmann Housing Tracker • 63 implied HN points • 08 Sep 23
💰 Finance Interest Rates
  1. Market prices aren't changing due to temporary factors, leading builders to use rate buydowns instead.
  2. Builders are using rate buydowns to close the gap between mortgage rates and other interest rates in the current market.
  3. The unique market conditions make rate buydowns a strategic tool for builders, influencing the mortgage market stability.

Corporate investment after rate cuts

Klement on Investing • 1 implied HN point • 09 Dec 25
💰 Finance Interest Rates
  1. A one percentage-point cut in policy rates typically raises corporate investment by about 7% over the following two years, though the average masks big differences across firms.
  2. Firms that build long-lived assets (real estate, utilities, healthcare) react much more to rate cuts than companies with short-lived assets like tech and media.
  3. Many companies still won’t invest after rate cuts because of weak opportunities, labour shortages, or a need for cash, so monetary policy works slowly and depends on business confidence — which governments and media can help amplify or undermine.

Fed may generate sugar rush in 2026

Klement on Investing • 1 implied HN point • 25 Nov 25
💰 Finance Interest Rates
  1. The Fed could cut interest rates much more aggressively in 2026 than markets currently expect, partly because of political pressure to ease quickly.
  2. The central bank’s stance has swung from dovish to hawkish and back again, which has left investors unsure about the future path of policy.
  3. If big cuts happen, they could trigger a short-lived "sugar rush" — a rapid but temporary boost to growth and markets in 2026.

The Fed's $300B Emergency Response

Apricitas Economics • 57 implied HN points • 18 Mar 23
💰 Finance Interest Rates
  1. The Federal Reserve lent over $300B in emergency funds to American banks to stabilize the financial system.
  2. Most of the emergency lending was short-term, with a majority of the funds coming from the discount window.
  3. Reforms to the discount window have helped reduce stigma around borrowing from the Fed during financial crises.

Data Update 3 for 2022: Inflation and its Ripple Effects!

Musings on Markets • 39 implied HN points • 27 Jan 22
💰 Finance Interest Rates
  1. Inflation has been high for a while, affecting how investors view the market. People are worried it won't just go away and are trying to figure out its impact on stocks and bonds.
  2. How we measure inflation can change depending on what we look at. What's important is how the market expects inflation to behave in the future, rather than just focusing on what's already happened.
  3. Interest rates and inflation are closely linked. If inflation expectations rise, it can push interest rates up, and this also affects how different investments perform, particularly when inflation is unexpected.

The Risks Still Lurking in the Banking System

Apricitas Economics • 42 implied HN points • 08 May 23
💰 Finance Interest Rates
  1. The American banking system is facing increased risks with several banks failing and many regional banks under pressure
  2. Market movements for surviving banks show negative excess returns, with declining valuations particularly for mid-sized regional banks
  3. Understanding rates risk in the banking system requires looking at exposure to long-term assets, especially in real estate lending, and the impact on uninsured deposits

The Fed Sees a Softer, Higher Landing

Apricitas Economics • 31 implied HN points • 21 Sep 23
💰 Finance Interest Rates
  1. The Fed is projecting a softer landing without the need for a recession to control inflation.
  2. There is less uncertainty in FOMC forecasts, and they anticipate higher GDP growth and slightly higher inflation.
  3. There are disagreements within the FOMC on the duration and extent of keeping interest rates high, with some seeing rates potentially staying permanently higher.

2023: The Year of The Cash ISA

The Fat Software Engineer • 30 implied HN points • 03 May 23
💰 Finance Interest Rates
  1. Consider opening a Cash ISA with a good interest rate if you might need the money in less than 5 years.
  2. Research different options and banks to find the best interest rate for a Cash ISA.
  3. Understand that with high inflation, even with a 3.4% interest rate, the buying power of money in a Cash ISA can still decrease.

Clouded Judgement 1.10.25 - Rising Rates

Clouded Judgement • 4 implied HN points • 10 Jan 25
💰 Finance Interest Rates
  1. The 10-year Treasury yield is rising even as the Fed cuts rates. This is mainly due to people's expectations of ongoing inflation.
  2. Strong economic growth is encouraging investors to seek riskier assets, which pushes bond yields higher. With low unemployment and good consumer sentiment, the economy looks solid.
  3. Tariffs on imports are increasing costs for businesses, which leads to higher prices for consumers. This adds to inflation worries and drives investors to demand higher bond yields.

The Leveraged Sellout

Malt Liquidity • 12 implied HN points • 10 May 23
💰 Finance Interest Rates
  1. The financial system is composed of equity, currency, and debt, with debt providing liquidity to trust.
  2. Interest rates compensate for the risk on loaned capital, and every lending act inherently contains some risk.
  3. Deposit banking and investment banking serve different clients, with depositors being stakeholders in their bank's success.

What is the Federal Reserve Thinking?

Economic Forces • 5 implied HN points • 21 Dec 23
💰 Finance Interest Rates
  1. The Federal Reserve's projection for the federal funds rate in 2024 is lower than previously thought.
  2. Understanding the 'natural' rate of interest is key to interpreting monetary policy.
  3. There is uncertainty in declaring victory over inflation without causing a recession.

How long? How variable?

Klement on Investing • 2 implied HN points • 07 Nov 24
💰 Finance Interest Rates
  1. The effects of interest rate hikes from the Fed can take a long time to show in the economy, often around 40 months. This means changes don’t happen immediately after decisions are made.
  2. Different types of goods react to rate hikes differently. For example, inflation for durable goods can keep rising right after a hike, while nondurable goods start to decrease right away.
  3. Today’s economy is more service-oriented than it was decades ago, making it harder to control inflation. This shift means that the impact of monetary policy is felt later and inflation management becomes more complex.

Japan is the playbook, not the exception

Klement on Investing • 3 implied HN points • 13 Mar 24
💰 Finance Interest Rates
  1. Japan manages extremely high debt levels through financial repression techniques, like central banks purchasing government debt and influencing bond yields.
  2. The duration mismatch between government assets and liabilities incentivizes keeping interest rates low for financial stability.
  3. Artificially low long-term bond yields in Japan lead to wealth redistribution towards older, wealthier households, potentially causing social tension.

January 2019 Data Update 2: The Message from Bond Markets!

Musings on Markets • 19 implied HN points • 07 Jan 19
💰 Finance Interest Rates
  1. Bond markets give hints about future economic growth and inflation. It's important to watch these markets to understand the economy better.
  2. In 2018, the bond yield curve flattened, meaning short-term rates increased. This change often gets people worried about potential recessions.
  3. Both bond and stock markets reacted similarly in 2018, with investors feeling more cautious and demanding higher prices for taking risks.

Which economic surprises matter?

Klement on Investing • 3 implied HN points • 15 Feb 24
💰 Finance Interest Rates
  1. Markets react to surprises in economic data, not just the data itself. A deviation from consensus forecasts often triggers market movements.
  2. The size of the economic surprise matters. The impact can vary based on the type of data, with some like inflation having stronger effects.
  3. Economic indicators like inflation, unemployment, PMIs, and consumer confidence are crucial for investors to watch. Interest rates also play a significant role.

European bond yields may keep rising

Klement on Investing • 1 implied HN point • 04 Nov 24
💰 Finance Interest Rates
  1. European bond yields are likely to keep increasing. This means that borrowing costs in Europe might rise.
  2. In recent weeks, notable increases in bond yields have been seen in the US, UK, and Germany. This suggests changes in how investors view long-term bonds.
  3. Investors might be adjusting their expectations about the future of government bond yields, moving away from the idea that they will consistently decline.

This is not what I normally do here…

Klement on Investing • 2 implied HN points • 12 Mar 24
💰 Finance Interest Rates
  1. Focus on empirical observations and data, rather than theoretical predictions, but sometimes theories need to be explored too.
  2. Countries with higher inflation rates tend to see their currencies depreciate over time, while carry tend to work in the short term with interest rate differentials.
  3. Aside from interest rates, fiscal policy can start to influence exchange rates, especially when countries aggressively reduce their deficits. This could potentially lead to a stronger Euro and Sterling against a weaker US Dollar.

Now that rates start to fall again…

Klement on Investing • 2 implied HN points • 20 Feb 24
💰 Finance Interest Rates
  1. Companies with high operating leverage tend to benefit more from extended periods of lower interest rates.
  2. High operating leverage can lead to a larger increase in profits with a small rise in revenues but can also make companies more vulnerable when the economy slows down.
  3. Investors should consider looking for and investing in companies with high operating leverage as financial conditions become less constrained.

Lawler: Some Thoughts on Quantitative Easing and Quantitative Tightening

CalculatedRisk Newsletter • 1 HN point • 04 Mar 24
💰 Finance Interest Rates
  1. Quantitative Tightening (QT) involves reducing the Federal Reserve's balance sheet, but it is not a complete reversal of Quantitative Easing (QE).
  2. QE involved purchasing assets to influence interest rates, like putting pressure on long-term interest rates to stimulate the economy.
  3. The impact of Fed Treasury and MBS purchases has significantly altered the maturity profile of government obligations held by the private sector and influenced interest rates.