The Herald Bulletin

Morning Update


April 4, 2014

'Big Joe' Clark: Curves ahead in national economic road

The numbers don't matter, or perhaps they just don't add up!

Over the past several years, the actions of the Federal Reserve have dominated the financial landscape. Arguably, the Fed’s actions have also played a significant behind-the-scenes role in economic improvement.

This is more than obvious to equity market watchers. What has stunned investors thus far in 2014 are two things: the bond markets, and the candid behavior of new Fed Chair Janet Yellen.

First, let’s address the yield issue on bonds. The beginning of the year ushered in a 10-year US Treasury yield of 3 percent and a presumed belief that interest rates would have to rise as the Federal Reserve began to taper its purchasing of US Treasury bonds.

Simple economics suggest that the Fed was supplying the demand for the bonds, thus driving their prices higher and their yields lower. Decreased demand driven by the taper should result in lower bond prices and rates spiraling higher.

Should-a, would-a, could-a — but that's not what happened! The 10-year Treasury increased in value as rates fell.

This surprise has baffled the best of the best. Bill Gross’s PIMCO fund has just seen 11 consecutive months of outflows as the bond market continues to make even the smartest and most experienced traders scratch their heads in disbelief.

Based on a CNBC report, PIMCO’s Total Return Fund will end the first quarter in the bottom 87 percent of similar funds. Will Gross be wrong forever? Probably not. There is obvious confusion in the marketplace.

The Federal Reserve previously implied they would change their low-to-zero rate policy as soon as they saw economic improvement and unemployment numbers dropped to a certain number. For some background, back in the late 1970s the Fed was tasked with the responsibility of setting appropriate price appreciation (code for controlling inflation) and driving the economy toward full employment.

Text Only
Featured Ads
More Resources from The Herald Bulletin
AP Video
Furry Roommates: Dorms Allowing Cats and Dogs Chase Rice Defends Bro-Country 'Jersey Shore Massacre' Pokes Fun at MTV Series Raw: Wash. Mudslides Close Roads, Trap Motorists DC's Godfather of Go-Go Honored Ukraine Calls Russian Convoy a 'direct Invasion' Girl Meets Her 'one in the World' Match Coal Gas Boom in China Holds Climate Risks Japan Landslide Rescuers Struggle in Heavy Rain Raw: Severe Floods, Fire Wrecks Indiana Homes Endangered Red Wolves Face Uncertain Future Raw: Russian Aid Convoy Arrives in Ukraine Okla. Policeman Accused of Sex Assaults on Duty Dominican Republic Bans Miley Cyrus Concert Raw: Israeli Air Strike in Gaza Raw: Bodies of MH17 Victims Arrive in Malaysia Attorney: Utah Eatery Had Other Chemical Burn

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Front page

Do you think heroin is a significant problem in Madison County?

Yes, it has surpassed meth as the problem drug
Yes, but meth is still a bigger problem
No, this was an isolated case
Not sure
     View Results