Heisenberg Report

“Don’t Believe The Hype”: 2 Charts Suggest Central Banks Are Not All Powerful

Here at HR, we like to present both sides of the argument when it comes to markets.

When it comes to politics, we like to present both sides of the story (hey look, it’s not our fault that the political story is one-sided right now – after all, we didn’t write it).

Unfortunately, we can’t say the same for some other popular commentators. True, everyone is biased (we certainly are) and everyone has an agenda (we certainly do), but despite what some readers say, we don’t push our biases nearly as hard as most other outlets that do what we do. Just today for instance, we published a great guest post on why European stocks could be set for an epic melt up (i.e. a bullish post).

Well, in the true spirit of keeping coverage balanced, we thought it would be a good idea to highlight the latest from Bloomberg’s Cameron Crise, who notes that contrary to popular belief, central bank liquidity from the ECB and the BoJ may not have that much of an effect on US yields after all.

Now needless to say, we’re skeptical and by “skeptical” we mean “on the verge of calling bullshit,” (what happens when you account for GCC and EM FX reserve accumulation?), but as Crise notes, “it’s always a good idea to challenge preconceived notions by delving into the data [and while] we sometimes find our convictions are strengthened, [other times] we find an answer other than the one we’re looking for.”

Via Bloomberg

While the Fed moves slowly toward shrinking its balance sheet, neither the ECB nor BOJ seem interested at the moment in slowing the expansion of theirs. What does the ongoing expansion of global liquidity mean for Treasury investors? It turns out the answer may be “not much.”