The Martin Luther King Series I savings bond at 1.06% composite rate (the composite rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the 30-year life of the bond, and the semiannual inflation rate).
Fed Chair Jerome Powell is adamant that the US will not go where other Central Banks have gone before … to negative rates.
Even though the Mankiw specification of the Taylor Rule model says that The Fed Funds Target rate should be -10.01% based on the surge in unemployment (14.70%) and the lack of core inflation (1.70%). The Fed Funds Target rate remains at 0.25%.
As unemployment surges (green line) with the lockdown, banks are expecting a tsunami of loan delinquencies and defaults. Hence, bank excess reserves have spiked as well (white line fever).
Hopefully with states opening up again, this is simply temporary.
The coronavirus crisis has killed hundreds of thousands, incapacitated millions and affected the livelihoods of billions — prompting policy makers to fear a deflation spiral reminiscent of the Great Depression. But economists including former Bank of England official Charles Goodhart, and investors such as BNP Paribas Asset Management, are asking if a different phenomenon lurks in the wreckage of global growth.
Muted Price Growth
IMF predictions for inflation rate at end of 2021
Yes, inflation rates are muted in the short-run, but the surge in government spending and The Fed balance sheet is scaring some people about “inevitable” hyperinflation.
And the surge in M2 Money Supply YoY is leading some to panic.
April virus brings May crashes. As in the spot price of WTI crude crashing to -37.63.
(Bloomberg) — West Texas crude plunged into the negative for the first time ever. WTI has been under extreme pressure as demand has been destroyed by the coronavirus lockdowns and a oil price war between Saudi Arabia and Russia has flooded the market. In addition, a technical oddity kicked in today as traders fled the May futures contract ahead of its expiration tomorrow. The June contract is currently trading for over $22 a barrel in New York.
May 20 Light Sweet WTI futures are DOWN to -24.92. But at least June and beyond futures prices are positive.
A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May. So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market. This is very rare.
It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair.
What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.
This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.
The COVID-19 virus sweeping the globe is having dramatic impact on asset and commodity prices. Particularly gold.
Contango, also sometimes called forwardation, is a situation where the futures price (or forward price) of a commodity is higher than the spot price of the contract today. Such is the case for gold futures where the futures price for gold exceeds the spot price.