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Discussion Paper
How Do Survey- and Market-Based Expectations of the Policy Rate Differ?
Over the past year, market pricing on interest rate derivatives linked to the federal funds rate has suggested a significantly lower expected path of the policy rate than responses to the New York Fed’s Survey of Primary Dealers (SPD) and Survey of Market Participants (SMP). However, this gap narrowed considerably from December 2015 to January 2016, before widening slightly at longer horizons in March. This post argues that the narrowing between December and January was mostly the result of survey respondents placing greater weight on lower rate outcomes, while the subsequent widening ...
Discussion Paper
Breaking Down TRACE Volumes Further
Following an earlier joint FEDS Note and Liberty Street Economics blog post that examined aggregate trading volume in the Treasury cash market across venues, this post looks at volume across security type, seasoned-ness (time since issuance), and maturity. The analysis, which again relies on transactions recorded in the Financial Industry Regulatory Authority's (FINRA) Trade Reporting and Compliance Engine (TRACE), sheds light on perceptions that some Treasury securities—in particular those that are off-the-run—may not trade very actively. We confirm that most trading volume is made up of ...
Journal Article
Government securities investments of commercial banks
Government securities holdings at U.S. commercial banks have risen rapidly since 1990. The author contrasts the recent rise with increases observed during and after earlier recessions and evaluates possible explanations for the buildup. In addition, he presents a rough estimate of the interest exposure created solely by the securities acquisitions and compares it with estimates for earlier periods when commercial banks also added U.S. securities to their portfolios at a fast rate.
Journal Article
Financial liberalization and monetary control in Japan
This article examines the effects of financial market reform on monetary control in Japan during the past two decades. The authors identify changes in the Bank of Japan's operating strategy and evaluate the Bank's ability to influence key policy variables in the current liberalized environment.
Report
How stable is the predictive power of the yield curve? evidence from Germany and the United States
Empirical research over the last decade has uncovered predictive relationships between the slope of the yield curve and subsequent real activity and inflation. Some of these relationships are highly significant, but their theoretical motivations suggest that they may not be stable over time. We use recent econometric techniques for break testing to examine whether the empirical relationships are in fact stable. We consider continuous models, which predict either economic growth or inflation, and binary models, which predict either recessions or inflationary pressure. In each case, we draw on ...
Discussion Paper
Reconciling Survey- and Market-Based Expectations for the Policy Rate
In our previous post, we showed that the gap between the market-implied path for the federal funds rate and the survey-implied mean expectations for the federal funds rate from the Survey of Primary Dealers (SPD) and the Survey of Market Participants (SMP) narrowed from the December survey to the January survey. In particular, we provided explanations for this narrowing as well as for the subsequent widening from January to March. This post continues the discussion by presenting a novel approach called ?tilting? that yields insights by measuring how much the survey probability distributions ...
Monograph
Nonbank lenders and the credit slowdown