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  • #1,208,521
  • Jan 18, 2022 3:45pm Jan 18, 2022 3:45pm
Quoting Bones
{quote} discount rate is the top of the range no one borrows off the fed, cause thats the most expensive the system of rates is a free market {image}
YES
I
KNOW
THIS.
Blimey, we are going around in circles.

What I am saying is that despite this, FROM WHAT I HAVE READ IN THE LINKS PROVIDED, the DISCOUNT RATE from a Macro-economic point of view, is still a VERY IMPORTANT RATE as it affects the other rates when the Fed adjusts it.
Compulsions can be hard to resist
  • #1,208,522
  • Jan 18, 2022 3:46pm Jan 18, 2022 3:46pm
I've provided the links that spell it out.
Read it.
or
Don't read it.
Compulsions can be hard to resist
  • #1,208,523
  • Jan 18, 2022 3:46pm Jan 18, 2022 3:46pm
Quoting trumps
I've provided the links that spell it out. Read it. or Don't read it.
That's it from me.
Compulsions can be hard to resist
  • #1,208,524
  • Jan 18, 2022 3:48pm Jan 18, 2022 3:48pm
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Geting out of shorts , now at 24 , for a prft..... Going to bed. Almost squared the damage. . . .

  • #1,208,525
  • Jan 18, 2022 3:48pm Jan 18, 2022 3:48pm
Quoting Bones
{quote} Thats a hugely negative real rate then ? its 0% to 0,25%
It's not negative it is 0.25% interest rate.
  • #1,208,526
  • Jan 18, 2022 3:50pm Jan 18, 2022 3:50pm
Quoting trumps
{quote} That's it from me.
don't worry about that rate
the rate that banks use is the fed funds ,what can I say thats not used especially with cash rich banks ,

you can borrow in the financial markets at 0.05%
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On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #1,208,527
  • Jan 18, 2022 3:53pm Jan 18, 2022 3:53pm
real rates are hugely negative
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On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #1,208,528
  • Jan 18, 2022 3:56pm Jan 18, 2022 3:56pm
Quoting Bones
{quote} don't worry about that rate the rate that banks use is the fed funds ,what can I say thats not used especially with cash rich banks ,
The most influential economics tool the central bank has under its control is the ability to increase or decrease thediscount rate. Shifts in this crucial interest rate have a drastic effect on the building blocks of macroeconomics, such as consumer spending and borrowing.

how-do-central-banks-impact-interest-rates-economy.asp
Compulsions can be hard to resist
  • #1,208,529
  • Jan 18, 2022 4:04pm Jan 18, 2022 4:04pm
Quoting Bones
{quote} don't worry about that rate the rate that banks use is the fed funds ,what can I say thats not used especially with cash rich banks , you can borrow in the financial markets at 0.05% {image}
No, wrong.
  • #1,208,530
  • Jan 18, 2022 4:05pm Jan 18, 2022 4:05pm
Quoting Bones
real rates are hugely negative {image}
Wrong.
  • #1,208,531
  • Jan 18, 2022 4:08pm Jan 18, 2022 4:08pm
I looked it up and no one goes to the fed for money unless theres an emergency
here's the chart
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On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #1,208,532
  • Edited 4:29pm Jan 18, 2022 4:09pm | Edited 4:29pm
December FED meeting and 10Y in focus here:

All known same day of meeting, enabling long term traders to position themselves with announcements like these. Well into the position by the time the actual rate announcement takes place, which is typically why you hear chatter around the actual event about it being priced into the market already which causes short term move in the opposite direction causing confusion and traders to panic sell or buy, only to loose out on the trend and get bashed in position after position.

Now to the meeting in December:

Doubling the speed of taper: Two Fed meetings away from finishing with a raise in June perhaps.

Three rate hikes in 2022, some calling for Four.

Here is the 10 Y maybe reacting to the FED meeting, maybe investors/traders getting in front of it and "setting" the rate. Either way you look at it, The FED is in Control, they drive this market, as do traders/investors but the FED has the tools and ability to control the money supply which in turns drives rates to where they want or think they should be based on Monetary Policy announcements/guidance. You also have to realize, sometimes the FED makes these announcements, and investors/traders do the work for the FED, allowing the fed to either dial back their decisions which can also spook the markets. So it can go both ways but like I said before, Keep it SIMPLE. Hey, either way you look at it, you still have to make a decision to BUY or SELL .

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Live example of Investors/Traders indicating and expecting Feds to raise rates. Trying to get in front of what the FED is going to do which they announced prior to it rising.

2 year highest yield close in 22 months.

10 year on highest yield close in 24 months

GERMAN 10 Y bund, closed at 32 month highs
Swing the AXE..HARD w/ Effort, Consistency and Patience
  • #1,208,533
  • Jan 18, 2022 4:10pm Jan 18, 2022 4:10pm
Quoting Bones
I looked it up and no one goes to the fed for money unless theres an emergency here's the chart {image}
Wrong.

The Fed creates money through open market operations, i.e. purchasing securities in the market using new money, or by creating bank reserves issued to commercial banks. Bank reserves are then multiplied through fractional reserve banking, where banks can lend a portion of the deposits they have on hand.
  • #1,208,534
  • Jan 18, 2022 4:10pm Jan 18, 2022 4:10pm
I doubt thats good enough to forget about the discount rate
On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #1,208,535
  • Jan 18, 2022 4:43pm Jan 18, 2022 4:43pm
Quoting HTG
December FED meeting and 10Y in focus here: All known same day of meeting, enabling long term traders to position themselves with announcements like these. Well into the position by the time the actual rate announcement takes place, which is typically why you hear chatter around the actual event about it being priced into the market already which causes short term move in the opposite direction causing confusion and traders to panic sell or buy, only to loose out on the trend and get bashed in position after position. Now to the meeting in December:...
ok what do you think would happen to that chart without one rate rise and taper to 0 QE
On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #1,208,536
  • Jan 18, 2022 4:59pm Jan 18, 2022 4:59pm
FED's current interest rate is 0.25%, which basically means you will get 0.25% interest annually for holding your savings in the bank. So basically this is the interest you GET. This is set by the FED, not by the free markets.

US 10 year treasury yield (US10Y) is currently 1.87% which means you will at least pay 1.87% interest for your loans (at least 1.87%, you will likely to pay more than that) and this is the interest that you PAY. This is set by the free markets and changes everyday.

If the FED hikes that 0.25% interest rate and it will, this will also push US treasury yields higher. (2, 5, 10 year yields etc.). So that means you will pay more interest for your loans and also get more interest if you have USD savings account in your bank.

By hiking the rates, FED will make people wanna keep their money on savings accounts and reduce the amount of money that's been spending and circulating. Which will cause lower growth, lower inflation and stonger USD.

Also by hiking rates and pushing the treasury yields higher, you will have to pay more interest for your loans and people will definitely want to avoid borrowing money from banks because it will cost them more. Which will decrease the amount of money that's been borrowing and spending. And that will cause lower growth, lower inflation and stronger USD.

I hope it was simple and clear enough, macroeconomics is not space engineering.
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  • #1,208,537
  • Jan 18, 2022 5:22pm Jan 18, 2022 5:22pm
Quoting Nordling00
FED's current interest rate is 0.25%, which basically means you will get 0.25% interest annually for holding your savings in the bank. So basically this is the interest you GET. This is set by the FED, not by the free markets. US 10 year treasury yield (US10Y) is currently 1.87% which means you will at least pay 1.87% interest for your loans (at least 1.87%, you will likely to pay more than that) and this is the interest that you PAY. This is set by the free markets and changes everyday. If the FED hikes that 0.25% interest rate and it will, this...
This is a good explanation.
Learn from your mistakes and march on.
  • #1,208,538
  • Jan 18, 2022 5:41pm Jan 18, 2022 5:41pm
Quoting Nordling00
FED's current interest rate is 0.25%, which basically means you will get 0.25% interest annually for holding your savings in the bank. So basically this is the interest you GET. This is set by the FED, not by the free markets. US 10 year treasury yield (US10Y) is currently 1.87% which means you will at least pay 1.87% interest for your loans (at least 1.87%, you will likely to pay more than that) and this is the interest that you PAY. This is set by the free markets and changes everyday. If the FED hikes that 0.25% interest rate and it will, this...
Thanks for this.
The impact of the discount rate on other rates is what makes it so important and not to be ignored.
Compulsions can be hard to resist
  • #1,208,539
  • Jan 18, 2022 5:45pm Jan 18, 2022 5:45pm
Quoting here2there
{quote} This is a good explanation.
People are making things look complicated and hard for themselves and for others. Which is one of the reasons why people are getting lost in the details and think fundamentals are hard. I can't blame them, since there are lots of pretenders that suffocates people with unnecessary amount of detail and misleading info. We are all here to trade profitably, not to become central bank chairmans. Throwing balance sheet charts at people may make us look smart, (i don't say QE is not important, it is but it's effect can be seen in the yields too) but in the end it's only interest rates and treasury yields that make the difference for traders and for the forex market. Add up inflation, growth rates too and you are good to go. It is that simple.

I am happy that you find my explanation helpful mate, i wish you the greenest pips
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  • #1,208,540
  • Jan 18, 2022 5:52pm Jan 18, 2022 5:52pm
Quoting trumps
{quote} Thanks for this. The impact of the discount rate on other rates is what makes it so important and not to be ignored.
Exactly! No need to get lost in the details.

Greenest pips to you buddy!
You have to have an IQ higher than 90 to interact with this user.
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