Has The Fed Actually Raised Rates This Year?

The answer is debatable but it depends on, exactly, to which rates you are referring.  The Fed has “raised,” more like “nudged,” the Fed Funds target rate about 50 basis points (one-half of one percent) this year.  That is, the Fed’s “target rate” for the Fed Funds rate was raised slightly at the end of two of the four FOMC meetings this year from 50 to 75 basis points up to 1 – 1.25%.  Wow.

But this is just one out of many interest rate benchmarks in the financial system.  The 10-yr Treasury yield – which is a key funding benchmark for a wide range of credit instruments including mortgages, municipal and corporate bonds, has declined 30 basis points this year.  Thus, for certain borrowers, the Fed has effectively lowered the cost of borrowing (I’m ignoring the “credit spread” effect, which is issuer-specific).

Moreover, the spread between the 1-month Treasury Bill and the 10-yr Treasury has declined this year from 193 basis points to 125 basis points – a 68 basis point drop in the cost funding for borrowers who have access to the highly “engineered” derivative products that enable these borrowers to take advantage the shape of the yield curve in order to lower their cost of borrowing:

In the graph above, the top blue line is the yield on the 10-yr Treasury bond and the bottom line is the rate on the 1-month T-bill.  As you can see the spread between the two has narrowed considerably.

Thus, I would place the news reports that the Fed has “raised in rates” in the category of “Propaganda,” if not outright “Fake News.”

One has to wonder if the Fed’s motives in orchestrating that graph above are intentional. On the one hand it can make the superficial claim that it is raising rates for all the reasons stated in the vomit that is mistaken for words coming from Janet Yellen’s mouth;  but on the other hand, effectively, the Fed has managed to lower interest rates for a widespread cohort of longer term borrowers.

Furthermore, this illusion of “tighter” monetary policy serves the purpose of supporting the idea of a strong dollar and enabling a highly orchestrated – albeit temporary – manipulated hit on the gold price using paper gold derivatives.

To borrow a term from Jim Sinclair, the idea that the Fed has “raised rates” is nothing more than propaganda for the primary purpose of “MOPE” – Management Of Perception Economics.  On that count, I give the Fed an A+.

5 thoughts on “Has The Fed Actually Raised Rates This Year?

  1. And what is Gundlach smoking? putting out headlines of “Rising rates” what a croc. REITs are not discounting higher real rates.

      1. Wrong.

        Greenspan was and is the consummate “LIAR”.

        All others can do is marvel at the “Maestro’s” natural born talent, while providing only a faint echo of his “performance”.

  2. HOT David Rubenstein Named Chairman of the Board of the Council on Foreign Relations

    David M. Rubenstein, co-founder and managing director of the private equity firm the Carlyle Group, has been named chairman of the board of the Council on Foreign Relations effective July 1. He succeeds both former U.S. Trade Representative Carla A. Hills, chairman and CEO of Hills & Company, and former U.S. Treasury Secretary Robert E. Rubin, who are concluding their ten-year terms as co-chairs.

    CFR has also named Jami Miscik, CEO and Vice Chairman of Kissinger Associates and former Deputy Director for Intelligence at the Central Intelligence Agency, and Blair Effron, co-founder of the investment banking firm Centerview Partners, as vice chairs of the Board.

    Rubenstein is one of the most significant players in the Deep State. He is smart, calculating and accessible.

    I reported this story about him in 2010:

    Laura Bush is out with her memoir, Spoken from the Pocketbook Heart.

    Fed chairman Ben Bernanke doesn’t make it into the book, neither does Treasury Secretary during the GW years, Hank Paulson. But what’s a White House memoir without a memory of David Rubenstein, the co-founder of the private equity firm Carlyle Group, who made George H. W. hundreds of millions after he left the White House ?

    Laura tells us that not only did Rubenstein show up at the White House for a 60th wedding anniversary party for George H.W. and Barbara Bush, but he gave the toast!…

    Laura describes David as a “long time friend.” Translation: Anybody that can figure out how to exploit George’s connections for more money than any of them had ever seen before can certainly be a life long friend.

    Look, Rubenstein on a personal level is a nice guy. Whenever I have spoken to him, he has always been polite to me. When I have asked him a question out of left field to throw him off, he tends to really spend time to think about the question and give me a thoughtful answer, but of all the people George and Barbara have met over the years, and some probably truly long-term friends, it is remarkable that Rubenstein, who is roughly 30 years younger than George H. W., is giving a toast at at the Bush’s 60th wedding anniversary.

    -RW

    http://www.economicpolicyjournal.com/2017/06/hot-david-rubenstein-named-chairman-of.html

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