The Federal Reserve's mandate leads or lags? | Forex Factory

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The Federal Reserve's mandate leads or lags?

  • #1
  • First Post: Dec 16, 2015 6:42pm Dec 16, 2015 6:42pm
"Permit me to issue and control the money of a nation, and I care not who makes its laws!"

Who CONTROLS the market ? The small group of monopoly economists, who conspire together in a small room at Jackson hole ? Or the market ?

Dating back to the creation of the federal reserve, to today we see the correlation and who LEADs the market. Go figure its the "market".


3 month US treasury bonds lead the Federal Reserves decisions. What does this mean ? This allows for individuals, such as forexfactory members, to capitalize on sound trading decisions to profit!! Please observe each time the federal reserve would change the banks lending rate, the 3 month US treasury bond leads, the FEDs decision.

What does this mean ? Observing the 3 month US treasury bond yield, is the driving force of the federal reserve decision. The Federal Reserve is a lagging indicator. However the forex market seems to be some what neglecting the treasury bonds direction. Something to watch for in the future.

To further support this claim on Dec 3rd when Janet Yellen testified in front of the congress, stating " Federal Reserve Chair Janet Yellen told Congress Thursday that economic conditions appear to be improving enough for policymakers to raise interest rates when they meet in two weeks as long as there are no major shocks that undermine confidence."

3 month treasury bonds rose from .11% on november 15th to .21% on Dec 3rd to .29% on Dec 15th.

The largest increase since March 2009.
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  • #2
  • Dec 19, 2015 8:56am Dec 19, 2015 8:56am
not a single replay

Does everyone already know this did I miss that memo ?
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  • #3
  • Dec 19, 2015 2:16pm Dec 19, 2015 2:16pm
The Fed doesn't just change monetary policy as it pleases, it's policy is always a reaction to economic/business cycles ...... in a recession it eases policy to stimulate economic activity, during high growth it needs to tighten to control inflation. If you know which indicators the fed follows, and how it reaches its decisions, it isn't hard to know what the fed needs to do and approximately when it needs to do it. Since FOMC meets to adjust policy less than once a month, bond and currency traders who pay attention can usually get in first and shift the market before the fed acts.
si hoc legere scis nimium eruditionis habes
  • #4
  • Mar 11, 2017 2:43am Mar 11, 2017 2:43am
This Wednesday, we are going to see the FED make an important decision, that will move the markets, a large sum.

With that said, which way will the FED go, Increase rates or leave the rates unchanged?

Historically 3-month US Treasuries lead the FEDs decision, when changing rates. When we look at historical data, we see the FEDs Fund Rate LAGs, the 3-month t-bill and at the same time, the FED likes to maintain a higher percentage GAP.

In the screenshot below, we establish, who leads who!
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  • #5
  • Mar 11, 2017 2:45am Mar 11, 2017 2:45am
In the following screenshot, we see the 3-month treasury leading the way, with the FEDs maintaining its GAP.
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  • #6
  • Mar 11, 2017 2:49am Mar 11, 2017 2:49am
In the following screenshots, we see what is currently happening: 3 month T-bills lead the FEDs fund rate. This will mean, we will see a increase in rates this wednesday 15th, 2017, for the FED to maintain its, higher percentage, GAP.
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  • #7
  • Mar 11, 2017 8:19am Mar 11, 2017 8:19am
Cogsx86

Quality posts

There has been talk of a 5 basis point increase. Personally I can't see it. But perhaps the Fed might do it if they think that they are too far behind the curve.

Any views in this
  • #8
  • Mar 11, 2017 2:34pm Mar 11, 2017 2:34pm
Quoting Fader123
Cogsx86 Quality posts There has been talk of a 5 basis point increase. Personally I can't see it. But perhaps the Fed might do it if they think that they are too far behind the curve. Any views in this

That is a good question. Lets break down the past 2 years. This data is for friday, should be interesting to see what happens monday, tuesday (will update).

Dec 11th 2015 (Friday): FED Rate - .14% 3 Month T- Bill .22% FED rate lags by .08% FED increased rates by .22% to .37%

Dec 9th 2016 (Friday) : FED Rate - .41% 3 Month T-Bill rate .53% FED rate lags by .12% FED increased rates by .25% to .66%

March 9th 2017 (Thursday): FED Rate - .66% 3 Month T-bill rate .749%. FED Rate lags by .09%.

Now here is my analysis for the increase and by how much. From Dec 2015 to Dec 2016 (12 months) we see a T-bill increase of .31% in one year, as unemployment drops. From Dec 2016 to March 2017 we see a T-bill increase of .219% in 3 months. With employment sitting at 4.7%, both the feds mandates are being filled. If the FED sits back and only increases rates by .189%-.25% by the next time the FED meets, with current growth in mind, T-Bills will surpass the FEDs rate again. And remember from above, the FED likes to maintain a higher rate then 3-month T-Bills. This should lead the FED to increase the rate to 1%. Or in this case .34%.
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  • #9
  • Mar 11, 2017 3:51pm Mar 11, 2017 3:51pm
Quoting COGSx86
{quote} That is a good question. Lets break down the past 2 years. This data is for friday, should be interesting to see what happens monday, tuesday (will update). Dec 11th 2015 (Friday): FED Rate - .14% 3 Month T- Bill .22% FED rate lags by .08% FED increased rates by .22% to .37% Dec 9th 2016 (Friday) : FED Rate - .41% 3 Month T-Bill rate .53% FED rate lags by .12% FED increased rates by .25% to .66% March 9th 2017 (Thursday): FED Rate - .66% 3 Month T-bill rate .749%. FED Rate lags by .09%. Now here is my analysis for the increase and by how...
Its not often I see such well thought out research on FF
  • #10
  • Mar 11, 2017 5:17pm Mar 11, 2017 5:17pm
post based on facts are so rare and always wellcome. you convinced me. we will see. If so $ will boost.
  • #11
  • Mar 14, 2017 6:45am Mar 14, 2017 6:45am
Todays T-Bill rate is the highest its been since September 2008

source: https://www.investing.com/rates-bond...nth-bond-yield
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  • #12
  • Jun 12, 2017 5:01pm Jun 12, 2017 5:01pm
Back in march we seen the FED increase rates, with 3 month treasuries moving above the FED's rate. Over the next 3 months we seen a steady increase in 3 months (march to now) yields, but unable to move above the FED's rate. This will be sign of what is to come on Wednesday. The FED will not adjust interest rates.
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  • #13
  • Jun 14, 2017 10:05am Jun 14, 2017 10:05am
3 Month T-bills have moved past, the FEDS FUNDs rate.
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  • #14
  • Jun 14, 2017 10:23am Jun 14, 2017 10:23am
Thank you. Do you think the recent move above the Fed rate will move the dial?
D labour of a fool wearieth him cos he doesn't know how to enta d city
  • #15
  • Jun 14, 2017 10:24am Jun 14, 2017 10:24am
Something also to consider, the USD Index vs the Feds decisions. As can be seen here, as the FED increases rates, the USD gets weaker.
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  • #16
  • Edited 10:42am Jun 14, 2017 10:29am | Edited 10:42am
Quoting lordgbengs
Thank you. Do you think the recent move above the Fed rate will move the dial?


edit: At this point, I do think the FED will hold off with a rate hike. The reason:

The first 2 increases came after the US Treasury rate remained above the FEDS fund rate for 1 month or more. Current rates have only been 2 weeks. The last rate hike came after a sudden climb in the T-bill rate of .5 to .72, in a very short period, this time however rates have only made a .08% increase.

T-bills have been slowly moving in a steady trend, which could break, this should raise caution for the FED at this point. Also with the CPI today coming in sluggish.

Expect the USD to get stronger.
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  • #17
  • Jun 14, 2017 10:35am Jun 14, 2017 10:35am
As in will the treasury bill rate higher than the Fed rate which is a recent move convince the Fed to raise rates. But let us wait and see what happens. Thank you.
D labour of a fool wearieth him cos he doesn't know how to enta d city
  • #18
  • Jun 14, 2017 10:39am Jun 14, 2017 10:39am
Quoting lordgbengs
As in will the treasury bill rate higher than the Fed rate which is a recent move convince the Fed to raise rates. But let us wait and see what happens. Thank you.
edited above post
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  • #19
  • Jun 14, 2017 3:00pm Jun 14, 2017 3:00pm
Quoting COGSx86
{quote} edit: At this point, I do think the FED will hold off with a rate hike. The reason: The first 2 increases came after the US Treasury rate remained above the FEDS fund rate for 1 month or more. Current rates have only been 2 weeks. The last rate hike came after a sudden climb in the T-bill rate of .5 to .72, in a very short period, this time however rates have only made a .08% increase. T-bills have been slowly moving in a steady trend, which could break, this should raise caution for the FED at this point. Also with the CPI today coming...
The indicator is consistent, well done.
D labour of a fool wearieth him cos he doesn't know how to enta d city
  • #20
  • Sep 19, 2017 6:38pm Sep 19, 2017 6:38pm
The FED continues to follow.

Recently in Canada we seen the same thing.
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