Tag: federal reserve

July FOMC Meeting – Will it be a non-event?

July FOMC Meeting – Will it be a non-event?

Trading Articles
Summary: FOMC meeting is due on Wednesday, July 26th There will be no press conference after the FOMC statement Fed officials are likely to communicate further on the plans to unwind the balance sheet Markets expecting a less than 10% chance of a rate hike this week Overall odds of a rate hike for the rest of the year stands just around 50% Fed unlikely to change much of its communication The FOMC meeting this Wednesday, July 26th is likely to pass off as a non-event as investors were seen not expecting much from the central bank this week. The fact that there is also no press conference following the FOMC statement potentially lowers the odds of any surprises from this week's meeting. The fact that the Fed funds futures rate hike probability has odds of less than 1...
How does the Federal Reserve’s QE Work

How does the Federal Reserve’s QE Work

Financial Markets Explained
Quantitative Easing, or Money Printing has been the most commonly used term among Central Banks across the world. Currently, the US Federal Reserve, Bank of England, to name a few engage in QE or asset purchase program in an effort to give their respective economies a boost. The US Federal Reserve for example has embarked on its latest QE since September 2012 promising to buy (and buying) MBS or Mortgage Backed Securities. While it might seem straight forward understanding how this QE(3) works gives investors and traders alike better insights into how the Federal Reserve aims to boost the economy. What is a Mortgage Backed Security MBS for short, falls under the derivatives market and works similar to that of Bonds, stocks or mutual funds. The MBS is a pool of Mortgages backed up by the ...
The Volcker Rule Explained

The Volcker Rule Explained

Financial Markets Explained
Recent reports from the media that Washington required more time to review to the Volcker rule, deferring it to the first quarter of 2013 gives some breathing space for financial institutions. Whether you are an investor/trader or have an account with a US bank, the Volcker rule is something you should know about. In this article, we explain what is the Volcker rule and its implications on banks, their customers and traders. The Volcker rule is a key component of the Dodd Frank Act that was implemented on July 2010. The basic essence of the Volcker Rule is to implement a ban on proprietary trading that banks currently engage in. What led to the Volcker rule proposal came out of the 2007 - 2010 financial crisis that engulfed many banks in the US. Proprietary trading is when a firm ...
Operation Twist – What is it all about

Operation Twist – What is it all about

Economic Indicators
Operation Twist is a federal reserve monetary policy involving buying and selling of bonds in an effort to push down the interest rates on mid term and long term interest rates. In Operation Twist, the Federal reserve sells the short term or mid term treasury bonds and uses the cash to buy the long term treasury bonds thus generating demands and reducing the interest rates. In bond markets, when there is a demand for bonds the interest rates are low and vice versa. The term Operation Twist was named after the Chubby Checker song and was first tired in the 60's. The name comes due to the graphical representation it has on the yield curve. A typical yield curve has a linear upward sloping yield. The Operation Twist's actions aims to twist the end of the yield curve which gave rise to ...