Greenspan problem why reappear after the federal
reserve to raise interest rates
A decade ago,The federal reserve(FED), a former chairman of theAlan greenspan(Alan Greenspan) put forward such a problem: the central bankIncreases in interest ratesAfter long-term yields basic unaffected.
In early 2005, Alan greenspan fed into her problem: when the fed raised short-term interest rates, but America's long-term interest rates are steadily.To this, Mr Greenspan's successor, Mr Bernanke (Ben Shalom Bernanke) explain that this is because, some Asian countries and oil producers savings can absorb us treasuries.
On December 16, the fed is expected to raise interest rates by 25 basis points, before so this is the federal reserve to raise interest rates for the first time in nearly a decade.After the raising interest rates, sure enough, "greenspan problem".To raise interest rates just a few hours, the United States Treasury rates curve becomes more smooth, short-term treasuries (2 years) and long-term U.S. debt (30-year) between spreads narrowed to 200 bp, under a new low 9 months.
The private bank, Brown Brothers Harriman, (global head of currency strategy at Brown Brothers Harriman), Marc Chandler, expects the fed to start tightening monetary and then the possibility of long-term yields lower, because the countries and regions outside the United States is still in practice the extraordinary easing, at low prices, a weak global growth, low inflation.
JPMorgan Chase (JPMorgan Chase), an analyst at Niko Panigirtzoglou and his team analysis: if long-term interest rates are more important than short-term interest rates, the fed's current and future increases in interest rates will have a significant impact?In long-term interest rates fluctuate with short-term interest rates when the answer is "YES", but this kind of transmission mechanism is not established, especially given that the fed will continue to roll over due debt, the loan of government bonds and government agencies to reinvest the principal of the securities mature.
Panigirtzoglou also pointed out that the previous round of interest-rate increases (2004 to 2006) reminds us that the problems of short - and long-term interest rates transmission mechanism is a question of how a headache.At that time, the fed raised target for the federal funds rate by 425 basis points, but the 10-year bond yields rose by 25 basis points only.Conduction block or "debt problem" is mainly due to the enterprises in developed countries and emerging economies are the result of saving power.The power savings will block the interest rate transmission channel length again?
From the conclusion, these two factors have not disappeared, analysis is as follows:
First of all, the developed countries.
For the first factor which causes the savings glut, jpmorgan chase, driven by the United States department of non-financial companies, has fallen steadily since 2009 us companies save, but from a very high level.
Given the financial sector and the capital surplus, including Europe, Japan, in the second quarter of this year G4 overall enterprise surplus countries is still close to 2005 highs.
In a growing economy, the corporate sector is usually financial assets, the net producer of today has become a net accumulation, this means that companies are no longer borrowing money for expansion and reinvestment, instead more savings for the winter.
Second, emerging economies.
Emerging economies is another great source of saving power.Jpmorgan chase willEmerging marketsFall in reserves, capital outflows and savings to reduce the loss to discuss separately, the latter is typical case of gulf oilThe dollarThe disappearance of the.
For the former, jpmorgan think it influence on the bond market is limited, investors may be adjusted positions and investments, leave the money in emerging markets has not disappeared from the financial system, but to return to the advanced economies.
In the latter case, relatively serious problem.Oil producers have to use the official reserve assets decline to stop spending more than income.In 2015 the country's current account deficit has reached $100 billion, which means that this year must reduce $50 billion in foreign exchange reserves and a $50 billion sovereign wealth fund assets.Jpmorgan chase is expected to oil producers official assets loss $100 billion next year.
Jpmorgan, however, other emerging markets are expanding current account surplus, rather than decrease, which means that the overall emerging markets savings rate is rising in the past year, not down.
In addition, the European central bank and the bank of Japan also in the implementation of quantitative easing, given the national debt over German bonds and the Japanese government bonds more attractive, investors in these areas is likely to continue to expand fixed-income assets in the United States.
In conclusion, jpmorgan thinks, superposition of the enterprise and the emerging markets of developed countries to save the European central bank and the bank of Japan's QE policy, the Treasury market is facing in the round of interest-rate increases the possibility of "greenspan problem" is on the rise.
To reconstruct the puzzle of "Alan greenspan, the financial times put forward another view: is there a possibility is that long-term interest rates and short-term interest rates is the existence of two relatively independent, the correlation between them was not so high?
In the previous round of interest-rate increases (2004-2006), the fed raised target for the federal funds rate by 425 basis points, but the 10-year bond yields rose by 25 basis points, only the 20-year bond yields fluctuations smaller, even after a period of time interest rates appear upside down.
From the perspective of the history of a little longer, long-term interest rates and short-term interest rate volatility has always been strong independence, in the late 1980 s, the federal reserve tightened monetary policy, in less than a year to raise interest rates close to 3%, the results of long-term interest rates was unimpressed:
A few years later, the federal reserve cut interest rates several times, the result is:
From 1994 to 1995, the federal funds rate again higher, long-term interest rates had fallen dramatically:
The financial times, Matthew C Klein wrote:
Short-term interest rates tend to be more with the economic cycle fluctuation, the duration of the economic cycle are usually less than a decade, according to the national bureau of economic researchdata, economic cycle is the average time is 4 to 6 years).
Klein also wrote that when the economic downturn, the fed "" on the accelerator, short-term interest rates over the next decade should be less than your
average interest rate on the reasonable expectations;And when the economy is overheating, the federal reserve tightened monetary policy, short-term interest rates are higher than you 10 average annual rate of reasonable expectations for the future.Therefore, long-term interest rates are usually should not be as short-term interest rates.
That's why people think interest rate curve slope can release long term economic signal accurately.
When the economy climbspeakAnd began to decline in short-term interest rates are higher than long-term interest rates, as traders bet on short-term interest rates down significantly.In other jargon is the interest rate curve upside down.In the economic bottom ready to rebound, the yield curve is steep, reflect the short-term interest rates will rise to meet future expected nominal spending accelerated.
Assume that inflation is relatively stable, short-term interest rates should be able to make interest rate curve become more smooth, and eventually appear upside down.To sum up, the longer the duration of the economic cycle of expansion, from the economic downturn and the resulting rate cut will be near.
Is shown in the figure below, if the 10-year Treasury yield can perfect forecast movements in short-term interest rates, interest rates would show what: