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Fed Says Economy Slowed in Winter as June Liftoff Odds Drop

Last updated: 09:32 30 Apr 2015 BST, First published: 08:32 30 Apr 2015 BST

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Fed Says Economy Slowed in Winter as June Liftoff Odds Drop 

This article by Christopher Condon for Bloomberg may be of interest to subscribers. Here is a section: 

Fed officials have said they expect to raise rates this year for the first time since 2006 as the economy nears full employment, and that their decision will be guided by the latest data. A report earlier Wednesday showed growth almost ground to a halt in the first quarter, held back by severe winter weather and slumping business spending and exports.

“Although growth in output and unemployment slowed during the first quarter, the committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace,” the Fed said.

Stocks and U.S. Treasuries pared earlier losses after the announcement. The Standard & Poor’s 500 index was down 0.5 percent at 2,104.62 as of 2:10 p.m. in New York after earlier falling as much as 0.8 percent. Ten-year Treasury notes yielded 2.04 percent, up 4 basis points from Tuesday.

The Fed repeated it will raise rates when it sees further labor-market improvement and is “reasonably confident” inflation will move back to its 2 percent goal over time. The decision was unanimous.

Eoin Treacy's view 

The bullish argument for the Dollar rests on the predominance of the USA’s recovery relative, to Europe in particular but, just about every other major economy. However we also know that the Dollar’s rally has already achieved much of the tightening that might have occurred by raising interest rates. 

 

Gross Sees No Liquidity in Bonds as Small Trades Move Market 

This article by Madeline McMahon and Lisa Abramowicz for Bloomberg may be of interest to subscribers. Here is a section: 

While the U.S. government bond market has almost tripled since 2007 to $12.5 trillion at the end of last year, average annual trading volumes have fallen 11 percent in the period, according to data compiled by the Securities Industry and Financial Markets Association. Activity has slowed as central banks hoard the debt and Wall Street firms use less of their own money to facilitate bigger trades.

Regulators are growing increasingly concerned that the U.S. Treasury market, which sets benchmark rates for everything from mortgages to corporate debt, is more vulnerable to unpredictable swings. On Oct. 15, yields on 10-year Treasuries plunged the most since 2009, without an obvious catalyst.

After data was released today showing slower growth in the U.S. than analysts expected, yields on the debt rose 2.9 percent, much to the confusion of many analyst

Eoin Treacy's view 

The regulatory environment for insurance companies and pension funds has changed beyond recognition since the financial crisis. There are very strict rules on what constitutes Tier 1 capital and how much of it needs to be held. This means there are heavy penalties for not holding government bonds so investors have an incentive to hold onto positions. Add to this the increasingly massive size of central bank holdings and it is not difficult to understand that the market for Treasuries and other benchmark bonds might be illiquid. 

 

Email of the day on solar cell manufacturers 

This was a useful update on the solar industry and Canadian Solar in particular. CSIQ's chart pattern seems to show 1 year range between $20 and $40. Maybe time for a breakou

Eoin Treacy's view 

Thank you for this topical article. . Here is a section: 

Along with government incentives to combat global warming, a more natural economic process in the marketplace is driving quick growth in demand for solar power. Cheaper panels and cheaper batteries mean that not too long from now consumers will simply put solar panels on their roofs because that is cheaper than buying electricity off the grid.

The U.S.-based Rocky Mountain Institute warned earlier this month that utilities in the U.S. Northeast stand to lose as much as half of residential sales by 2030 as customers install solar and battery-storage systems and generate their own power.

To keep up with this increase in demand, Canadian Solar plans to almost double its own panel capacity from 2013 levels, Qu said. Along with supply from original equipment manufacturing, total capacity will reach more than 4 gigawatts, he said. 

 

Interesting charts April 29th 2015 

Eoin Treacy's view 

If the Dollar acted as a headwind for Wall Street while it was surging, its decline should help to act as a support. The S&P 500 was relatively inert today against a sharp decline in Europe. A sustained move below 2040 would be the minimum required to begin to question potential for continued higher to lateral ranging. 

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