US Miller: Weak TIPS Sale Reflects Reassessed Infl Fear
NEW YORK (
MNI) - Treasury Under Secretary Mary Miller Thursday night avoided a specific direct comment on the day's relatively weak $18 billion TIPS 5-year note auction.
But she did tell MNI in an exclusive comment that "over the past week, people have been reassessing their inflation expectations."
She also hailed the cooperation between the Bank of England and the U.S. FDIC on banking regulation.
Miller was answering questions from the audience at the annual Hyman Minsky Conference where she had delivered a speech saying, as reported earlier, that as much as current commentary ascribes great funding advantages to those banks of a size to be considered "too big to fail," that the perception may be increasingly out of date.
The U.S. TIPS market declined sharply Thursday afternoon after the auction tailed nearly seven basis points although it drew reasonably good indirect bids. The auction size had been increased $2 billion over a similar previous auction.
Miller also parried when asked by an audience member if the U.S. regulators such as Treasury should make U.S. banks leave ISDA. "You need to step back and look at the totality of financial regulation," said Miller.
Adapting to the "clarity" of the Dodd-Frank Act about how taxpayers will be spared any future bank bailouts, credit ratings firms that had given the biggest banks a seven-notch uplift beyond their underlying creditworthiness, have now taken back as much as six notches, she said earlier.
"One rating agency," she noted "has also recently indicated it may further reduce or eliminate its remaining ratings uplift assumptions by the end of 2013," she said.
--MNI New York Bureau; tel: +1 212-669-6432; email:
smullan@mni-news.com
The Chart Making The Fed Nervous
While Cyprus has been brushed away as a "storm in a teacup" and asset-gatherers stare blankly at their screens pointing at record highs to confirm the "market knows best", it appears something rather important 'broke' that day (and hasn't stopped breaking since). While we have discussed the rather glaring divergences between US equities' exuberance and global
equity markets and
macro- and micro- data; supposedly the Fed's key indicator (the 5Y5Y forward inflation expectation) has reversed rather significantly. The last two times, forward inflation expectations dropped so significantly, the ECB launched LTRO and the Fed launched QE3. It seems the BoJ's QQE is not having the effect perhaps they had hoped on inflation expectations. Will the Fed have to come to the rescue once again? And how will gold react to that?
Cyprus appears to have stolen the jam out of the reflation-game donut...
as one of the Fed's key indicators (5Y5Y forward inflation) is diverging significantly... suggesting multiple compression (not expansion)
or moar money-printing...
It seems the BoJ's actions are not holding up...
Perhaps this is why the G-20 so subserviently acquiesced to everyone devaluing (or fighting deflation) since if everyone devalues then no harm, right? And perhaps, just perhaps, the gold smackdown was pre-empting this to bring it back to a level that can be defended when the next round of global coordinated money-printing begins - or we move to QE-infinity-squared.
Charts: Bloomberg
(h/t
@GreekFire23)
Source:
Zerohedge
Treasury Under Secretary Mary Miller: Weak TIPS Sale Reflects Reassessed Inflation Fear (The Chart Making The Fed Nervous)
