I would never ask for myself, but I do think my fellow bearish bond anti-vigilantes deserve a round of applause. In the past week, the 30-year treasury yield has fallen from 2.50% to 2.27%. The yield held its ground today, in spite of the rising interest rate environment we find ourselves in, and in spite of the stock market rocketing higher. That's an amazing amount of spite and support for our fragile financial system. We're there for you. We've got your backs.
Not only will we continue to support future stock market valuations, but we also pledge to continue ruthlessly attacking the evil New York bank net interest margins on your behalf (as seen in the chart below), just as we ruthlessly attack the future returns of this country's many underfunded pension funds. It's all for you. Enjoy this era of permanent modern prosperity! Please don't let it go to waste!
Click to enlarge.
February 17, 2016
The Telegraph: Negative interest rates a 'dangerous experiment' for the world as monetary policy hits buffers
Commercial banks are at particular risk from negative rates, which have been described as a tax on the banking system.
Sub-zero rates reduce the profit made on interest, while increasing the cost of capital for borrowers. Japan's banking sector has seen its net interest margin (NIM) fall to 25-year lows as a result of the Bank of Japan's unprecedented monetary stimulus, according to data from Morgan Stanley.
Sometimes, in order to save a thing too big to fail, one must first nearly destroy a thing too big to fail.
St. Louis Fed: Net Interest Margin for Banks in New York
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