Central Bank Confidence Game

Draghi signaled a fresh round of monetary stimulus last week, and risk assets staged a spirited rally from deep sell offs that had occurred this month. High profile warnings from Soros, Gundlach, Dalio, William White of the OECD, etc, had instilled peak pessimism in global markets, with the SPX trading well below August’s lows and the VIX rallying above 30 on Wednesday. On Thursday morning the market heard echoes of “whatever it takes” from Draghi, and it was enough to spur short covering. The question now becomes, “how far will it carry?” and, “has the fundamental backdrop that sparked this month’s rout really changed?” The latter question is clearly the key, and puts the spotlight right back on the Fed and Wednesday’s FOMC announcement. If the Fed backs up Draghi by putting the market on notice that its tightening campaign may be suspended, then said market will have to reconsider its bearishness.

Crude oil rallied about 15% from Wednesday’s low. It sounds huge, except for the fact that in the beginning of November CLH6 was above 50, and had fallen below 28 by early Wednesday. In that light, a bounce to a bit over 32 doesn’t seem quite as impressive. Nor does the stock rally. However, interest rate markets had to make a concession in sympathy with the global matrix, and the treasury curve tacked on a few basis points of yield. On the week, the ten year treasury rose all of 2 bps to 2.05%; hardly an “all clear” endorsement for risky assets. Implied vol recoiled from elevated levels as well, a part of the same dynamic. VIX fell back to 22.3.

Central bankers are necessarily concerned with the global financial architecture as the core transmission mechanism for monetary policy. That’s why there are stress tests and somber faced officials supporting implementation of macroprudential rules in order to foster confidence in the system.   [Exhibit A]

Now I’m no expert in international banking, but I do know a suspicious stock chart when I see one. I present Exhibit A above, which shows Deutsche Bank, Credit Suisse and JPM since 2006. DB and CS are at 2009 crisis lows! US financial institutions have generally fared much better, but it’s all interconnected. Clearly, a couple of stocks aren’t necessarily instructive with respect to the health of the global financial system. And I haven’t checked CDS and other risk measures of the banking universe. However, what springs to mind is a Far Side cartoon:

 

 

I don’t know how to insert a picture of the European Banking System. But it’s in the ‘Don’t Touch’ category, just as sure as a guy wearing a shoe for a hat.

Which brings us to the crux of the problem. According to Felix Zulauf, global equities have lost $16.4 TRILLION of market cap since the middle of 2015, from 73.2 to 56.8. That’s a staggering statistic. Can we trust the central bankers to reverse market messages (and rebuild asset values)? The fact that the market routinely ignores the Fed dots gives an indication. And there are other clues. From Mauldin: “Something else China Beige Book noticed last quarter: both business and consumer loan volume did not grow in response to lower interest rates. That’s an important change, and probably not a good one. It means monetary stimulus from Beijing can’t save the day this time. Leland thinks fiscal stimulus isn’t likely to help, either. Like other governments and their central banks, China is running out of economic ammunition.” At Davos, the BoJ’s Kuroda suggested the Chinese institute capital controls rather than burning through reserves. I am sure the Chinese are thinking Kuroda has enough on his own plate, given the loss of effectiveness of QE in Japan.

I know it’s a tired theme, but the question is, have global central banks lost credibility? Can they ‘save the day’? I think we are on the cusp of a definitive answer, and I think the political climate both in the US and across the world is indicative of a loss of confidence in long standing institutions, including Central Banks.

Jan 22. The reversal dance, but what happens when the music stops

–Rebound in stocks as Draghi said inflation concerns make it necessary to reconsider the ECB’s policy stance in March.  Stocks and crude oil rallied, interest rate futures fell.  All highly correlated.  Next week is the FOMC meeting, there will likely be mention of declines in market based measures of inflation in the statement.  All highly choreographed.
–I don’t know much about the European banking system, but I do know that monetary authorities are taking notice.  DB’s stock price has been cut in half in last year’s high of 36 in April, and this month’s decline from 23 has been on very heavy volume.  Many financial shares have been pounded, and central banks always want to ensure a functioning financial infrastructure with which to implement policy, such as it is.
–In the US, yields rebounded slightly, with tens back over 2% (+3.3 bps to 201.7).  Eurodollars pushed lower and the curve steepened.  Red/gold pack spread actually made a new monthly high of  98 bs, up 1.625 on the day.  If the Fed refrains from further tightening, the curve should steepen; it’s likely to steepen over the next couple of days pre-FOMC.  There were again some huge eurodollar option flows.  I will just note the new buy of 90k 0EJ 9875/9837ps for 7 bps ref EDM6 trading 9891.0 (6.5s / 9893.0s).  Also, EDU6 put spreads bought in size with 9900 the top strike.  EDU 9900p gained 150k in open interest, now up to 320k.
–Today’s news includes Chgo Fed National Activity Index, which has been negative for the past 4 months straight, last at -0.30.  Existing Home Sales expected 5.2 million.  Leading Indicators -0.1.

Jan 21, 2016. Davos frets

–Top headline on today’s WSJ: Markets’ Panic Incongruent with Economic Reality.  A little cheerleading to start the day.  However, the guys in Davos are circumspect.  Telegraph’s AEP highlights a few views (link below).  From the IMF’s Zhu Min, “The key issue is that liquidity could drop dramatically, and that scares everyone.”  From Kenneth Rogoff: “What is driving this is that the central banks are not coming to the rescue,” he said… Rates are already zero or below in Europe and Japan, and quantitative easing is largely exhausted, leaving it unclear what they could do next if the situation deteriorates.
–The ECB is on tap this morning, the Fed next week.  High profile warnings yesterday from Dalio, Gundlach, William White, etc provided a sharp sell off that broke August lows and provided opportunity for short covering as early panicked selling was quickly exhausted.  But it doesn’t mean the move is over…in the short term it comes down to central banks’ response.  China continues to ham-handedly provide support, but if Rogoff is right, then there’s more equity carnage to come.  I saw several views noting that VIX hadn’t yet seen a surge that indicates peak fear.  However, the comparison is with August, when China’s devaluation was completely unexpected.  This time things are more controlled.  If we ignore the VIX spike in August, then yesterday’s high of 32 is the highest level in 4 years. (I don’t think a break of the Saudi dollar peg will elicit the same type of surge as China, but that’s likely coming).
–Where the vol situation might also become significant is in interest rate markets. A friend from the ED option pit notes that the pit (mkt making community) is short in size.  It always works.  Except that even now vols are not tremendously expensive, and if central banks flub it, premium will inflate.  Hard.
–In terms of market action, near eurodollar calendar spreads again made new lows.  The first two 3-mo spreads, Mar’16/Jun’16 and Jun’16/Sept’16, both settled at just 6.5 bps. The one year spread March’16/March’17 settled at 29.5, just barely above a quarter percent –one hike in a year.  C’mon Fed.  Embrace what the market is telling you!  Treasury yields fell, with tens down 5.6 bps to 198.4, essentially at the lowest closing yield level seen last October.  In options, there was liquidation of over 100k 0EH 9887/9900/9912 c trees at 0.5 and 0.0, having been entered at 3 to 3.25 on the buy side.  Market went up a little too fast, too much.

 

http://www.telegraph.co.uk/finance/economics/12110415/Fears-of-global-liquidity-crunch-haunt-Davos-elites.html

 

Jan 20. Tough start to the year

…it is written that misfortune knoweth not the hour to cease.

http://www.telegraph.co.uk/finance/financetopics/davos/12108569/World-faces-wave-of-epic-debt-defaults-fears-central-bank-veteran.html
“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something” William White OECD

–Here we are again sub 2% in US tens as March Crude is below $29 bbl and ESH is revisiting August lows.  The quote above is from William White of the OECD who ultimately recommends fiscal investment from governments as the best policy response.
–Yesterday could well have been a record in terms of euro$ option trading.  On the upside 50k Blue April 9850/9875 c strips were bought from 10.5 to 12.  Almost everything else was downside, including a large buy of EDM6 9912/9887p sprd with 9900p in size of at least 40k.  June put open interest rose by 194k to a total 3.9m. Vol jolted higher across the curve. EDM6 9925 straddle surged from 18 settle Friday to 20 yesterday.  The EDU 9912.5 straddle went from 26.5 to 28.0.  Also huge buying of EDU6 9900/9925 strangle for 17 (call side was exit).  There was a sale of over 100k EDU6 9937/9950cs at 2.0, 2.75s.  Other notable trades below.
–We are now just a week away from the Jan FOMC, which does not include a press conference (thankfully).  Carney was dovish yesterday, and the Fed will likely signal paralysis by citing international stress, and might even finally note that market based measures of inflation expectations are IMPLODING.  No more hikes for you.
–Speculation is now growing for another devaluation by China.  The initial surprise was in August, which shook global stocks.  But now stocks are already at August lows, so a further downside push seems quite plausible.

–Other large ED plays, buyer of 2EM 9825/9775ps 9.5 paid 50k covered 9850.
2EU 9825/9787ps 11.5 paid 30k covered 9842.  100 calls bought again, in EDZ6 for 0.5 and EDM7 for 1.5.

January 17. Behind the Curve

Wait ‘til next year. Sort of a motto for Chicago.   In this case though, it’s the Eurodollar calendar spreads sending the message of no more rate hikes. Near one-year calendars plunged right along with stocks, with March’16/March’17 down 15 bps on the week to just 32.5 and June’16/June’17 down 12.5 to 35.0. The peak one-year has shifted further back on the curve to Dec’16/Dec’17, but even that one’s only 38.5. The first two three-month calendars closed at new lows of only 7.5. Fed officials have said the first rate hike was a sign of confidence in the economy. The stock market and curve are sending a different signal. It’s not that the Fed has been all that bad about communicating, it’s that they have underestimated China and energy weakness.  The US-centric models need to be revised. Late Friday the Atlanta Fed released an updated forecast to Q4 GDP at just 0.6. Remember, this started out at 2.5%.  JPM revised its Q4 estimate to just 0.1 (from 1.0) and called retail sales “shockingly weak”.   Reuters had a weekend headline, ‘Fundamentals could resurface after wrenching sell-off’. Uh-oh. As mentioned last week, the warning signs had been piling up, in the form of high yield, energy prices, weak economic data. Now Fed officials have locked onto the concern of “inflation expectations”. The charts of 5y5y inflation forwards and ten yr treasury /tips, (market-based indicators of inflation expectations), are moving into the lower right hand corner in search of the x-axis. Maybe the Fed will squeeze out one more hike this year, but I doubt it. The back-tracking has already begun: DUDLEY: IF ECONOMY WEAKENED, WOULD CONSIDER NEGATIVE RATES

I don’t personally think we need to spend too much time thinking about economic conditions. We know they’re anemic, even though the household sector is in pretty good shape. Now it’s all about the odds of various policy-maker responses. For example, ZH had an article saying the Dallas Fed had meetings with banks with high exposure to energy, asking them not to force bankruptcies, but to encourage asset sales. This article further said the outcome of the meetings was suspension of “mark-to-market on energy debts, and as a result no impairments are being written down.” Macro-prudential policy in reverse. There’s no way for me to know whether this article is true, but there’s likely a grain of truth in it, and it’s certainly the case that stress in the system is increasing. For example, I noted some issues with auto loans last week, and this week Ford 5yr CDS is the highest in two years and GM is getting close. Autos have been a bright spot in the economy, but the market continues to raise red flags.

The core concern is that of a negative spiral of asset prices. QE programs are meant to boost asset prices and thus instill confidence in the economy. Now prices are falling, even in Japan which is still involved in QE, where the Nikkei is off 18% since the high of last year.  I have maintained that the end of QE in the US is one of the main reasons that repressed spreads have blown out. Even if conditions worsen, it’s hard to imagine the Fed going back to QE. So my base case is that the Fed simply won’t hike again and will try to jawbone the Federal government into fiscal stimulus, and maybe relax some rules, as alluded to above with the Dallas Fed.

In terms of trading strategies, I favor being long EDH18 and short anything behind it. On a week where a lot of spreads collapsed, it’s worth noting that reds to greens (2^nd to 3^rd year) held steady, closing 36.75 Friday from 35.875 the previous week. A lot of trades have been built on the premise of the Fed being in a tightening cycle, i.e. flatteners. If the Fed is NOT in a hiking cycle, then the curve will steepen, simple as that.

The global geopolitical situation does not seem to be improving. The election of pro-independence candidate Tsai in Taiwan is a reminder that tensions can easily flare up in Asia even excluding N Korea. China is facing economic headwinds and has reacted clumsily; a push from another direction could elicit unexpected responses.

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	1/8/2016	1/15/2016	chg
UST 2Y	94.4	84.2	-10.2
UST 5Y	157.6	144.9	-12.7
UST 10Y	213.1	203.0	-10.1
UST 30Y	292.4	281.1	-11.3
GERM 2Y	-39.5	-39.4	0.1
GERM 10Y	51.4	54.0	2.6
EURO$ H6/H7	47.5	32.5	-15.0
EURO$ H7/H8	40.5	38.5	-2.0
EUR	109.26	109.17	-0.09
CRUDE (1st cont)	34.32	30.39	-3.93
SPX	1922.03	1880.33	-41.70
VIX	27.01	27.02	0.01

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January 15, 2016. The Fed’s policy bedrock: “It can’t go down forever…”

–There’s a lot of news out today including Retail Sales and Industrial Production (estimates at bottom).  Also sev’l Fed speakers, Dudley being the most important at 9 EST.  I don’t know if Dudley’s comments will be a formal speech, but I looked back on his last speech on November 12 (link below), and at that time, even before the hike, he said that inflation was problematic.  He said that China and other EM’s were stabilizing (which hasn’t quite panned out).  Here are a couple of direct quotes: “…we have still not seen compelling evidence that a tightening labor market is leading to more rapid labor compensation gains.” “On the inflation side of the ledger, I have greater concerns because we continue to fall substantially short of our inflation objective of 2 percent… There is also some evidence that suggests that inflation expectations are under downward pressure.” Dudley specifically cited the spread between tips and treasuries, and the 5y5y frd inflation measure, both on the chart below, and moving towards the lower left. So if that’s how he felt BEFORE the hike and the tumble this year, how does he feel now?
–Bullard also voiced concern over inflation expectations yesterday, as did Kocherlakota.  It’s hardly encouraging that sev’l Fed members have said “oil won’t go down forever” as one of their core reasons for hoping that inflation will ascend.  I happen to agree, but the market isn’t so sure, with oil at a new low this morning and stocks getting spanked.
–In US rates, the curve pushed higher, with a solid bid in the front end as reds closed UP 2.375, and weakness further out, with golds DOWN 2.25 and the ten year yield +3.5 bps to 209.8.  The big buyer of 0EH 9887/9900/9912 call tree (+1/-1/-1) was active again, paying 3.25; up to 150k bought in the past two sessions (EDH7 9893.0s).  Also a new buyer of 40k EDZ6 9950/9962 c spd for 1.5.
–Jan midcurves expire today in eurodollars.  Red March is only 2.5 away from the 9900 strike, Green H only 2.5 away from the 9862.5 strike and Blue H has blown through the 9825 strike.  It promises to be an interesting session.
–Asia was again weak.  From BoJ’s Kuroda: “I don’t have plans for further monetary easing at the moment. But we’re ready to adjust policy without hesitation if there is any change in the broad price trend”.  The BoJ’s QE program is falling flat in the face of China’s depreciation.  The Nikkei is down 15% since the beginning of December.

Today: PPI expected -0.1 with Core +0.1.  Retail Sales 0.0, +0.3 ex-auto and gas, Empire State -4.0, Industrial Production -0.2 from -0.6 last.
Fed speakers, Dudley at 9, SF Williams at 11 and Dallas Kaplan at 1.

Dudley’s last speech:
https://www.newyorkfed.org/newsevents/speeches/2015/dud151112

Jan 14, 2016. Redistributing pain

–ESH minis had an outside day covering the previous two sessions (new high in the morning) and closed on the low without a significant bounce all day.  The ten year auction was well received at 2.09% and yields pushed even lower into the end of the day, lowest yield since October.  The five year yield closed 152.6, essentially at the halfway back level from the mid-Oct low of 1.27 to the end of year high at 179.3.  (50% is 153.2).

–All ED calendar spreads again made new lows.  For example EDM16/EDM17 (I mistakenly wrote EDM7/M8 yesterday) closed at a new low of 41 bps.  The M/M/M fly has plummeted from +20 to just +4 bps since the beginning of the year, a violent move.  The rally in this fly since October from 5 to 21, has been completely wiped out in a week and a half.  The Fed needs to stand up and take notice what the market is saying.  I guess Evans finally did, though he’s been a lonesome dove for a while, saying China makes him nervous and that inflation expectations might not be firmly anchored.  Yesterday EDZ6 100 calls were bought for 0.5 bp in size of about 40k, a bit over 100 bps out of the money, a reminder that the US might not be immune from negative rates.

–As usual, there were rumors of forced selling and margin calls yesterday.  Canada and Mex Peso again made new lows against the dollar.

–Speaking of Evans, the Chicago Fed is right across the street from the Chicago Board of Trade Building.  That will be a good vantage point to watch the protesters attempt to block entry to the trading floor tomorrow.

https://www.dnainfo.com/chicago/20160111/south-shore/lasalle-street-protest-will-block-trading-centers-friday-activists

“We want people to know that poor people across this city are in pain, so we look at this as a redistribution of that pain,” Livingston said. “Since the mayor has made it clear he only listens to the monied interests in this city, we’re going to take it straight to them.”

The protest “…will aim to prevent “billions” of dollars of trade profits from flowing through the downtown center.”  Really? ALL the floor guys were short?

Jan 13, 2016. Skin in the Game

–Once again all near euro$ calendar spreads made new lows Tuesday as oil probed below $30/bbl before bouncing.  Peak one-year spread is EDM16/M17 which fell 2.5 to only 42.  There was heavy selling (90k) in EDH16/EDM16 at 10 to 9.5, settled 9.5.  Open interest this morning appears to indicate a roll with March OI -23k and June +49k.  But think of the absolute level! Just 9.5 bps for a three month spread in a tightening environment.  Richmond Fed’s Lacker gave a speech yesterday with this line (at the core of his comments): “If oil prices bottom out and the value of the dollar peaks, but inflation does not soon move back toward 2 percent, a shallower path for interest rates would make sense. If inflation moves rapidly back toward 2 percent, however, a more aggressive path would be in order.”  Quite meaningless.  Sure, at some point the dollar may peak and oil may bottom, but even THEN you’re not going to have a sense of how inflation will move?  By the way, besides euro$ calendar spreads falling, the ten year note to inflation index note yield spread edged to a new low of 145.7 bps, and the 5y5y inflation forward swap is likewise at a new low and the BBG Commodity index is at the low from 1999, and down 69% from the 2008 high.  Markets are voting with an eye towards a more deflationary outlook.
–These latter points are contributing factors in high profile warnings from investors with what is commonly known as “skin in the game” (as opposed to random dot generators). First, RBS: “Andrew Roberts, the bank’s credit chief, said both global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings, and uncharted waters given that debt ratios have reached record highs.”  DoubleLine’s Gundlach has warned about the same sorts of issues and is calling 2016 a year for “capital preservation.”  Perhaps this bounce in equities from oversold levels will bring calm back into the financial landscape. (My friend TS referred to it as ‘el gato muerte’).  And hey leo, no ZH quotes today.
–Big sigh of relief as China’s export numbers were much better than the expected -8% and came in slightly positive.  Well sure, the value of the currency is being slashed.  It’s like the Joseph A Banks retailing model: Buy this pair of socks and get four suits free!!  Look at all the merchandise moving through the door!!  But competitors like S Korea and Japan are none too happy about it.  Similarly, GBP has dropped 7% since October vs USD, from over 154 to a new low near 144.  Sure, it will provide a boost to the UK economy, if the US consumer, upon which everything still seems to depend, holds up.

Jan 12. Old economy / new economy

Jan 10. High Anxiety (weekly)

• High yield, energy markets, EM currencies have been flashing warnings for months. Now spillover into equity markets is creating high anxiety.
• The 2007/08 crisis was US driven but spilled over into the rest of the world. Why is it so hard for US pundits to grasp the importance of China similarly exporting financial instability? Is the US supposed to have a lock in that department? What do you need? A made-in-China frying pan to whack you in the forehead?
• Quick look at US Consumer Credit and Auto Loans.

Stocks tumble/ treasuries see modest bid

Here’s one of the early lessons I acquired the hard way. When you get bearish news and the market rallies, it’s a bull market. After strong non-farms of 292k Friday, treasuries closed on their highs and open interest went up in all contracts. Yes, the wage component was weak. Yes, seasonal adjustments may have been faulty. But in a bear market, NFP alone would have sent TYH hurtling lower. No reason to stand in the way of bullish price action, especially with weak stock markets.

Since lows at the end of last week, red and green Eurodollar contracts rallied over 25 bps; the evaporation of at least one prospective hike. EDH18 for example is up 31 bps from Dec 30 close. One year calendar spreads have collapsed. June’17/June’18, the peak one-year spread, is just 47.5 bps. Less than two hikes….take THAT Fed dots! Red to green Eurodollar pack spread (2^nd to 3^rd year) new low sub 36 bps!

In terms of US signals, high yield spreads had been blowing out for some time. Energy markets and commodities have been hammered. EM currencies have been pressured. In spite of all these red flags, some people want to place the blame for the stock sell off squarely on December’s Fed hike. “Michael Hartnett at Bank of America Merrill Lynch wrote that a tightening of financial conditions from the Fed often causes market ‘events’.” (Business Insider). Sure, it was another straw, but there were a lot of straws before the last FOMC. It’s my contention that the lagged effect of the end of QE is one of the biggest factors causing markets to adjust to new risk parameters, with China and regulatory changes as contributing agents. (SPX down 6% this week, but Dow Transports down 25% since last March!)

In any event, US manufacturing data have also been giving constant warnings; on display this week with ISM at just 48.2 and Prices Paid 33.5 (lowest since ’09). It’s all as clear as day in the Atlanta Fed GDP Now forecast for Q4, having been over 2.5% in early November and trending steadily lower to 0.8% currently. As Jim Bianco pointed out Friday (with Santelli on CNBC), in October 2009 the unemployment rate was 10% versus the current 5%. However, if the labor force participation rate had held steady, the unemployment rate would currently be 7.6%.

 

China

Clearly China is overshadowing all else at present. From Reuters: “Policy insiders are now calling for a quick and sharp yuan depreciation, backed by tighter capital controls to curb speculation and the flight of money out of the country.” That seems a likely course of action. The creativity to get money out of China is almost beyond belief. For example, Sovereign Man reported that Chinese are buying website domain names simply to circumvent capital controls.* It reminds me of the Cary Grant movie Charade. Make your wealth as small and transportable as possible; priceless stamps in Charade. Is that why gold is going bid? (By the way, I have a domain same for sale…)

So if all this money is trying to escape, but it’s now devalued and on lock-down, what happens to the assets that the previous flow was supporting? I think we’re seeing a hint of that now. Not pretty. And I think a good part of the decline to more negative levels in swap spreads this week is fear of more Chinese selling of reserves. The mere perception of Chinese authorities acting is enough to cause seismic adjustments.

Still, some people don’t think China is a big enough influence to derail US growth. It is. First, the US is not seeing great growth and second, China is huge. I had seen a million articles about China’s insatiable demand for commodities. Many articles on booming construction projects/ghost cities. This growth has stalled; doesn’t matter if we can’t exactly quantify it. From google, “China has 14 cities of over 5 million people (Shanghai, Beijing, Tianjin, Guangzhou, Shenzhen, Dongguan, Taipei, Chengdu, Hong Kong, Nanjing, Wuhan, Shenyang, Hangzhou, and Chongqing), whereas the USA has 8.”

So what happens going forward? If China clamps down further on capital flight, then global asset markets will likely suffer. What response from the Fed, ECB and BoJ? The Fed will abandon all pretense of trying to further remove accommodation. With the added instability of equity market weakness combined with refugee issues, tensions across borders in the EU will increase. Trade will suffer. Japan is toast. Earlier QE efforts there have run their course; anything new will be muted by the great wall of Chinese devaluation. Hopefully, the US administration will do what it can to ramp up fiscal stimulus. In an election year there is great incentive to do so, but also great obstacles.

Quick note on Auto Sales and Consumer Credit

As shown on the chart below, auto sales have been a bright spot in the US economy. My guess is that auto sales have peaked and are in for declines in terms of units sold. Outstanding auto loans are over $1T and the auto industry is about 3.5% of the US economy. The following data are from the Consumer Credit report: Avg amount financed in 2010, $25477. In 2014 $26288. Latest (Sept 2015) $27698, which is 5.3% higher than 2014. However, new car loan rates have come down from 6.28% in 2010 to 4.25% in 2014/15 for a 60 month loan. Consumers finance more for longer. Also, cash for clunkers was in 2009. So five years (60 months) later, we’ve probably seen the replacement spike. And auto financing isn’t likely to be quite as generous going forward.

 

 

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• ABOUT:
  Former member of the CME specializing in interest rate options and yield curve strategies.

  The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.