Wrightson ICAP, LLC

Founded in 1978 as an independent research firm, Wrightson joined the ICAP group of companies in 2000.  We specialize in the analysis of Federal Reserve operations and policy, Treasury financing trends and high-frequency economic data.  Our audience includes portfolio managers and traders in the money, bond and currency markets, as well as economists, strategists and central bank officials around the world.


A Wrightson subscription provides access both to our weekly newsletter, The Money Market Observer, and to our daily on-line service on the Web.  A subscription also provides access to our chief economist, Lou Crandall, and the rest of our research staff.  In addition, we provide customized consulting services, including the preparation of briefing papers and special reports, customer presentations and special-purpose publications.  Firms may integrate our website with their internal market-data systems on a site-license basis, and portions of our content are also available for co-branding on external websites. 

Press Clippings


No-Exit Strategy May Be Fed Burden in Unwinding Stimulus

August 1, 2014

The Federal Reserve is trying to change as little as possible as it crafts its strategy to exit from record stimulus. The trouble is financial markets have changed so much that the still-developing plan may prove costly and ultimately unworkable.

The approach, sketched out in the minutes of the Fed’s June 17-18 meeting and in officials’ comments since then, retains a focus on the federal funds rate as the central bank’s target. Policy would continue to be conducted mainly through banks rather than via dealings with money-market funds.

“They don’t want to make wholesale changes in the way they interact with markets when they are going to have so many other issues in play” as they raise interest rates, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, who has been watching the Fed for three decades.

…The foreign banks now are borrowing from U.S. federal home-loan banks, which aren’t eligible to earn interest on reserves held at the Fed and so are willing to lend cash in the fed funds market at a lower rate. That rate has averaged 0.08 percent in the past year. Since foreign banks are eligible to earn interest on reserves, they can place the borrowed cash at the Fed and collect a 0.17 percentage point profit on the overnight transactions.

… In what may be a sign of things to come, they “pulled back en masse” from conducting this kind of arbitrage on June 30 to avoid inflating their balance sheets at the end of the quarter, Crandall said in a July 14 note to clients.

The result: Money funds and others had to park their cash with the Fed because they couldn’t lend it to the foreign banks via time deposits, another instrument the banks use to finance the reserves they hold at the Fed. Instead, the money funds loaned a record $339.5 billion to the central bank through reverse repo agreements, more than three times the average daily amount during the rest of the month.


Fed Tunes Into Yellen Still Playing Labor-Market Blues

July 31, 2014

The Federal Open Market Committee’s policy statement yesterday diminished the unemployment rate as a measure of progress toward its full-employment goal, saying  “a range”  of indicators suggest “significant underutilization of labor resources.”

That’s a view Yellen has expressed repeatedly since she became chair in February. In her mid-July testimony to House and Senate committees, Yellen’s discussion of labor-market slack turned on broader indicators such the participation rate, rather than the unemployment rate alone.

“The labor-market signals have a bigger policy weight, which is why they don’t expect to tighten maybe for a year,” said Lou Crandall, chief economist at Wrightson ICAP LLC in  Jersey City, New Jersey . Yesterday’s FOMC statement “is putting flesh on things the chair has said before.”


Yellen Watching What She Eats Would Help Track Prices: Economy

July 28, 2014

The “sticky” consumer-price index, which only includes items with slowly changing costs such as food consumed away from home and car repairs, is one of the alternative measures that policy makers monitor. Other calculations by the Cleveland and Dallas Fed banks also strip out more volatile components, aiming to quiet the “noise” Yellen has suggested can affect broader measures, including the central bank’s favorite.

The message from these less conventional gauges: Inflation has bottomed out and is increasing, though not enough to cause concern at the central bank. “There’s nothing that would make you think that they’re going to overshoot their target” for inflation, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

… Just as Yellen looks at an employment “ dashboard ” of various government statistics to assess the health of the jobs market, policy makers are studying various measures of inflation to try to determine the trend in prices because the traditional measures can cloud the underlying trajectory, Crandall said.

The Financial Times

US looks at 'ultra long' Treasury bonds

July 25, 2014

The current calm could easily shift once the Fed  ends QE in October and the net issuance of Treasury debt with a maturity beyond 10 years starts rising sharply. Under this scenario, bond prices may well fall and yields rise as private investors are asked to buy more long-dated paper.

“The Treasury will want to wait to see how well investors absorb the new supply before adding even more long-duration issuance to its calendar,” says Lou Crandall, economist with Wrightson Icap.

… “This is not just a question of extending the average maturity of the debt for precautionary reasons, it would also be an attempt to target a specific pocket of demand more precisely than is possible with the Treasury’s current product menu.”

The Wall Street Journal

U.S. Considers Issuing Debt With Maturities of More Than 30 Years

July 23, 2014

The U.S. government currently sells Treasury bonds maturing in three decades or less to investors. It considered selling longer-term debt as recently as 2011 when the Treasury Borrowing Advisory Committee, a group of banks, investment firms and hedge funds that advise the Treasury on its debt auction lineup, floated the idea. At that time, dealers were concerned demand from investors would be volatile and unpredictable, making it risky for banks to sell and warehouse the securities, said Lou Crandall, chief economist at Wrightson ICAP LLC.

The Wall Street Journal

WSJ Survey: Economists Worry the Fed Will Keep Rates Low Too Long

July 17, 2014

Some 79% of the 42 economists who answered the question said the greater risk is that the Fed will raise rates too late, versus 21% who said the greater risk is that the Fed will raise rates too soon.

“Moderate macroeconomic conditions may lead [the] Fed to ignore financial risks,” wrote Lou Crandall, chief economist at   Wrightson ICAP.


Fed Moves Closer to Choosing Main Stimulus-Exit Tool

July 9, 2014

If the reverse repurchase rate were moved too close to the interest rate on excess reserves, “a lot of fed funds activity would just disappear,” said  Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City,  New Jersey .

The Financial Times

Bond traders bet the Fed has got it wrong on interest rates

June 27, 2014

Long-time Fed watcher Lou Crandall at Wrightson ICAP terms the current stand-off between the bond market and the Fed’s forecasts as “dot disbelief.”

He says an improving economy over the summer that is not accompanied by an upward shift in market interest rates will create problems. “The Fed doesn’t want to push intermediate-term rates up prematurely, but it also wants to avoid another violent repricing of market expectations when lift-off becomes unavoidable.”

… “Investors have made a lot of money over the past few years assuming that Fed policy outcomes would ultimately be more accommodative than mainstream FOMC rhetoric implied at the time,” says Mr. Crandall.

The Wall Street Journal

Time for More Transparency in the Fed’s Blue Dots

June 25, 2014

After the minutes of the March meeting, when committee members were cited as worrying that the dots chart “overstated” how much the FOMC’s views had changed and that the market might “misconstrue” the message, veteran Fed watcher Lou Crandall and his team at Wrightson ICAP penned a report calling for changes.

They suggested the forecasts be updated after each meeting to more closely align the changes to recent events. The FOMC meets every six weeks.

The firm also wants the report’s release delayed until the minutes of each meeting, which are published three weeks later, giving committee members time to digest those discussions before updating their forecasts.

“One hopes that the content of the discussion informs these things,” said Mr. Crandall. Although they have an opportunity to update their opinion before the full policy statement is published after each meeting, it seems officials for the most part submit their projections before the discussion takes place. This could partly explain why some committee members worried about being misconstrued in March.

Mr. Crandall also wants the Fed to cease rounding the forecasts to the nearest quarter point and to encourage FOMC members to submit a weighted average of their expectations rather than a singular forecast in line with the standard quarter-point increments at which the fed-funds rate typically changes. That means a dot could point to a federal-funds rate forecast of 0.85%, for example, if an official saw a 40% chance of a 0.75% rate and a 20% likelihood each for a 0.50%, 1.0% or 1.25% rate. Today, that forecast would be presented as a flat 0.75%. This would make changes between reports less abrupt and give a clearer picture of how quickly (or slowly) expectations are really shifting.

The most dramatic change would be to put names to each of the dots, to tell the market who predicted what.

That’s where Mr. Crandall draws the line. He worries that this would focus people’s attention excessively on the forecasts of Chairwoman Janet Yellen.


Dot plot shows widening split at the Fed

June 19, 2014

Lou Crandall, chief economist at Wrightson ICAP, noted that in the past few quarters there has been a narrowing of the gap between the 2016 forecast and the neutral level.

“In December, [the Fed policy committee] thought it would have moved the funds rate less than half-way back to neutral by the end of 2016, and now feels that it will have moved significantly more than halfway back,” Crandall said.

The New York Times

Federal Reserve’s Bond-Buying Fades, but Stimulus Doesn’t End There

June 19, 2014

The Fed in recent years has almost completely replaced its inventory of short-term government debt with longer-term securities that do not begin to mature until 2016. It has reinvested just $332 million in Treasuries so far this year, and would need to reinvest just $4 billion in 2015, according to calculations by Lou Crandall, chief economist for Wrightson ICAP, a financial research firm in New Jersey.

Reinvestment of mortgage bonds is also in decline. The Fed received and reinvested about $24 billion a month as borrowers refinanced loans or sold homes in 2013. But as interest rates have ticked upward, prepayments have declined. Reinvestment averaged $16 billion a month during the first six months of 2014, and Mr. Crandall estimates that the volume will stabilize a little below that level next year.

“The numbers are not zero, and it’s still important because they’re very mindful of the signaling effect of their operations,” he said. “But for 2015, it’s largely symbolic.”

That would change, however, in early 2016. Mr. Crandall calculates that $39 billion in Treasuries will mature in February that year, and about $177 billion during the rest of the year. Reinvesting those amounts would have a significant effect, he said.


How China is keeping U.S. bond yields low

June 16, 2014

The combined rise of U.S. debt held by China and Belgium tracks the growth in foreign exchange reserves, according to data from Wrightson ICAP LLC. That suggests China may be buying Treasurys under the guise of a different nationality.

Euroclear, a Belgium-based securities depository and custody provider, is often cited as a potential channel through which Treasurys are bought .

“You can make a circumstantial case that the fact that China’s reported holdings leveled off about the time Belgium’s holdings were exploding, and the fact that China was expanding reserves makes that a possibility,” said Lou Crandall, chief economist at Wrightson ICAP LLC. But Crandall emphasizes that while these flows are all possible, the lack of data makes it difficult to confirm.  


Producer prices retreat in May after two strong gains

June 13, 2014

Analysts have generally been wary of the PPI report, finding it hard to decipher the government’s new method of calculating wholesale prices — the report was overhauled in January for the first time in years.

“We are not really sure what the new numbers are telling us. We think the moderately positive CPI numbers that are expected on Tuesday will give us a more accurate reading on actual price-setting trends,” said Lou Crandall, chief economist at Wrightson ICAP, in a note to clients prior to the data release.


Fed Prepares to Maintain Record Balance Sheet for Years

June 11, 2014

Maintaining a large balance sheet in a tightening period would mark a strategic shift for the Fed and reverse much of central banking doctrine from the 1990s and early 2000s…

Lou Crandall, chief economist at Wrightson ICAP LLC, who has been watching money markets and Fed policy for three decades, compared the importance of the shift in strategy with the Fed’s decision to establish a monopoly on bank-note issuance after its founding in 1913.

One reason the Fed may stick with the strategy for a long time: It would provide safe assets that banks need to fulfill stricter requirements for capital and liquidity imposed by regulators since the financial crisis.

“One of the fundamental tenets of financial reform is that everybody is required to hold a lot of liquidity and nobody is allowed to provide it,” said Crandall, who is based in Jersey City, New Jersey. “The Fed has bridged the gap.”


Fed focuses on exit, decides to be flexible: minutes

May 21, 2014

“One great advantage of extending the debate about ‘how’ to tighten is that it keeps the question of ‘when’ stuck in background. If the Fed laid out a detailed exit strategy as early as, say, the June [fed policy] meeting, it might be difficult to prevent the market from pricing in a premature rate hike,” said Lou Crandall, chief economist at Wrightson ICAP, in a note to clients before the release.

The Financial Times

Fed to start liquidity draining tests

May 12, 2014

“A $10 bn limit at a rate of 0.3 per cent is commercially meaningful, and is likely to lead to a significant increase in participation,” said Lou Crandall, economist at Wrightson ICAP.

He added that while seven US institutions held balances significantly larger than $20bn with the Fed at the end of last year, 17 US branches of foreign banks also did and they could well be attracted by a term deposit facility that pays a little more interest than the current 25 basis points on offer at the central bank…

The Wall Street Journal

WSJ Survey: Economists See Growth Rebound

May 8, 2014

A big downside risk, cited by nearly 42% of those who answered the question, is an international shock. The negative risks include further slowing in China and the continuing conflict in Russia and Ukraine… "Geopolitical concerns could lead once again to defensive behavior" among businesses, said Lou Crandall of Wrightson ICAP.

The Wall Street Journal

Foreign Banks Collecting Billions From the Fed

May 8, 2014

Interest on the reserves is “one of the tools they’ll use in normalizing monetary policy in the years to come,” said Lou Crandall, chief economist at research firm Wrightson ICAP. “In order for that to be effective, you need to at least have some banks willing to take money from non-bank institutions and leave it on deposit at the Fed, and that’s how it transmits itself to the broader system.”


Yellen’s task: Point to continued low rates without badmouthing economy

May 6, 2014

“There are few more effective ways to trample on any ‘green shoots’ that might be cropping up than to have the central bank deliver dour pronouncements about the state of business conditions,” said Lou Crandall, chief economist at Wrightson ICAP.


Obama’s Shrinking Budget Deficits Silence Foreign Critics

April 14, 2014

For now, a slower pace of decline in the  budget deficit  will provide a tonic for the economy because fiscal “drag” -- the contractionary effect of reduced fiscal stimulus -- is abating, says Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

“If the projected declines over the next couple of years were larger as a percentage of GDP, they would be giving rise to more fears about fiscal drag,” he said.


Fed Officials Debated Signaling Too-Low Inflation Concerns

April 9, 2014

“They do feel a sense of urgency” on inflation, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “You have to come back constantly to the question of whether they have the tools to get inflation higher. It is not at all clear that a central bank can move inflation in fractions of percentage points.”

The Financial Times

Fed’s growing repo role risks backfiring

March 24, 2014

“The problem with the RRP programme is that it is an open invitation to bank runs,” says Lou Crandall, economist at Wrightson ICAP.

Already we have seen this play out in a limited fashion, at the end of last year. At such times, there is usually heightened demand for cash within the financial system as banks and investors wind down ahead of the year-end.

…Mr Crandall says: “The surge in RRP participation over year-end had a stabilising impact on financial markets because the Fed was filling a gap created when private institutions chose not to furnish an adequate supply of liquid instruments.

“Moving cash to the central bank becomes a no-brainer for liquidity managers.”


Yellen Pursuing Bernanke’s Fed Policies With More Direct Style

March 21, 2014

“She got dealt a really bad hand,” said Lou Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based unit of ICAP Plc, the world’s largest broker of financial transactions between banks.

He reckoned that about two-thirds of the decline in prices of shorter-dated Treasury securities on March 19 came in response to the higher rate forecasts, with the rest occurring after Yellen indicated the Fed might start to tighten credit sooner than many investors had expected.

The Wall Street Journal

Fed Dropping Numbers-Based Guidance Ends Policy-Making Experiment

March 19, 2014

Lou Crandall, chief economist at Wrightson ICAP said, “the Evans Rule was very suited the circumstances the Fed faced, but not something that can be replicated at all parts of the cycle.” He said, “because the economy was so far out of equilibrium, the Fed was in a position to offer fairly extensive guidance about what it wouldn’t do,” which in this case meant not raising short-term rates. In a more normalized environment, such a rule would not work, he said.

One other benefit of the Evans Rule has been to show the contribution regional Fed bank presidents can make to the policymaking process in a time when the Fed governors’ power appears greater.

In the case of Mr. Evans, “it’s to his credit that he proposed a rule that could command majority support” at the Fed at a time of divergent views on monetary policy and the economy, Wrightson’s Mr. Crandall said.


Quarterly GDP data are useless as real-time gauge: analyst

March 10, 2014

“The 2008 FOMC transcripts show the [Fed] committee at several points in the year struggling to reconcile the reported GDP figures with the trends suggested by the broad mass of other economic indicators,” Crandall said.

He called this a “wasted effort.”

“Simply put, we believe that there is no justification – ever – for using the quarterly GDP data as a real-time gauge of economic activity. The official estimates are too flimsy to be reliable for policy-making purposes,” Crandall said in a note to clients.

Without going too far into the weeds, Crandall said the problems with GDP are not simple sampling errors, but that each of the components that make up the number are independently adjusted both for inflation and for seasonality.

The Financial Times

Banks urge US Treasury to take bigger role in debt sales

February 5, 2014

“Our forecasts suggest that the case for cutbacks in the nominal notes is very compelling, but the Treasury sees things differently,” said Lou Crandall, economist at Wrightson Icap. “We think a strong case can be made for beginning to trim the five-year note along with the shorter coupons.”

The Financial Times

Floating rate Treasuries register strong demand

January 29, 2014

Lou Crandall, economist at Wrightson Icap, said  Mr Lew’s letter to Congress last week “ensured that the Treasury’s new floating rate note would meet with an enthusiastic reception when he kick-started the first-quarter debt ceiling showdown with a cautionary letter to Congress”.

He added: “The real fear for most asset money managers is not that Congress will actually trigger a technical default, but that they will be forced either to dump bills or to de-lever when prices and funding costs had already moved against them.”


U.S. Swap Spread Narrowest on Record on Fed Rate Speculation

December 18, 2013

Cutting the IOER, which is unlikely at this week’s meeting, “would lower the overall structure of rates at the short end, which might lead to negative rates for short bills, overnight repurchase agreement rates and even overnight Eurodollar deposits,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, wrote in a note to clients published on Dec. 16. “For the first time, there now a potential benefit to cutting the IOER. FOMC members view the move as symbolic rather than substantive , but the symbolism could be useful if the Fed is concerned about the market response to the first cutback in asset purchases.”


Five questions besides the taper the Fed may answer

Dec. 17, 2013

Lou Crandall, chief economist at Wrightson ICAP, thinks the Fed will go slow. “We cannot rule out the possibility that the Fed might choose to lower the IOER for signaling purchases, but we think it is more likely to play it safe,” he said.


Fed Weighs Cutting Rate on Bank Reserves After Repo Fix

December 11, 2013

Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said reducing the IOER would make Fed communications “extremely complicated” because central bankers would be wielding the repo facility -- introduced as an aid for the eventual tightening of policy -- to add stimulus.


Yellen Says Economy Performing ‘Far Short’ of Potential

November 14, 2013

Because inflation is low today, a policy maker “can be an inflation hawk and be in favor of policy accommodation at the same time ,” said Lou Crandall, chief economist at Wrightson ICAP LLC, a research firm in Jersey City, New Jersey.


Lessons from the switch to Bernanke from Greenspan

November 13, 2013

“Bernanke promised to keep the Fed on the Greenspan standard,” said Lou Crandall, economist for Wrightson ICAP. That translated into gradual rate moves, with a deep commitment to stable prices, he said.


Yellen’s style, if not substance, to be on display

November 13, 2013

“This is the first time that it will be her job to take the heat rather than avoid being a distraction,” said Lou Crandall, economist at Wrightson ICAP.

How Yellen handles the senators will give an accurate sense of “what her press conferences will look like,” Crandall added


Treasury Has Tools to Push 2014 Debt-Limit Deadline Past Feb. 7

October 17, 2013

“There is a 25 percent chance that the Treasury might be able to reach April 15 without a debt-ceiling increase,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, wrote in a research report dated today. “If so, April tax receipts would push the debt-ceiling deadline into the latter part of the second quarter.”


Fed Gets Bigger in Markets as QE Prompts New Tools

October 14, 2013

The new tool -- called the fixed-rate, full-allotment overnight reverse repo facility -- also is aimed at helping Fed officials address distortions in the market caused by their securities purchases.

“It will serve to put whatever floor they want under rates,” said  Lou Crandall , chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “You’re providing pretty broad-based access to Fed balances as an investment option .”

While the Fed gained the ability in 2008 to pay interest on cash it holds in the form of excess bank reserves, that tool has limited effect in anchoring borrowing costs because only banks could park their funds at the central bank, Crandall said. By now offering to pay a fixed rate to a wider range of counterparties for their cash overnight, policy makers should be able to improve their control of near-term rates, he said.


Lew’s Vow Not to Shift on Debt Limit Frustrates Republicans

October 14, 2013

The difference between choosing a deadline with a $30 billion cushion as Lew did and a date for when Treasury will have no cash is like comparing “code red” with “fiscal Armageddon,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said last month.


The T-bill yield spike could actually be a buying opportunity

October 10, 2013

But for retail investors who want to buy the short-term T-bills and hold onto them until they mature a month later, those concerns don’t really matter too much.

“If you don’t need them for liquidity purposes they don’t pose any risk, though there might be operational hassles,” said Lou Crandall, chief economist at Wrightson ICAP LLC.


Treasury market sentiment improves on debt talks

October 10, 2013

The yield on T-bills maturing on Oct. 17 dropped to 0.340% Thursday from 0.451% in the previous session, according to Tradeweb. Part of the reason was a Treasury Department announcement that it plans to settle debt on Oct. 17, suggesting that the government could continue to pay its obligations at that time, according to Lou Crandall, chief economist at Wrightson ICAP LLC.

…Meanwhile, the yield on T-bills maturing roughly six weeks later, on Nov. 29, jumped to 0.124% from 0.053% on Wednesday. “As far as somewhat greater concerns in the October and November bills, it reflects the same set of operational [issues],” Crandall said.


Recession Looms If Treasury Uses Tools to Prevent a Default

October 9, 2013

Lou Crandall, chief economist at Wrightson ICAP LLC, said the yields would be significantly higher if investors feared a genuine default. Instead, he said, what they’re concerned about is a deferred interest payment by the Treasury.

“Bill yields are close to zero for everything except stuff that might get caught up in the operational headaches of a delayed payment,” said Crandall, whose Jersey City, New Jersey-based company is a unit of ICAP Plc, the world’s largest broker of financial transactions between banks. “There is no default risk. There is a liquidity risk.”


Debtors’ Prison Is No Place for Country Like U.S.

October 9, 2013

If you still think the Treasury is going to look the other way and let the computer system pay bills in the order in which they are due, think about this.

“Treasury debt is the currency on which the U.S. financial system is based,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

The Financial Times

Risk of US default worries markets more than shutdown

October 1, 2013

“Having the Treasury run out of cash on a coupon settlement date is everyone’s nightmare, as an interruption in debt service payments on that day would affect all of the outstanding Treasury notes that pay interest on that day in addition to the issues that are actually coming due,” says Mr Crandall.

“As messy as the August 2011 episode was, at least the anticipated drop-dead date did not coincide with any major debt service payment obligations.”


Negative Rates on Treasury Bills Show Little Debt-Limit Concern

September 26, 2013

With regard to weekly bill auctions sizes, “we are entering a period of greater uncertainty due to the debt limit,” wrote Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, in a note to clients today. “The Treasury will pay down bills in order to make room under the current ceiling for the settlement of the mid-month coupons on Oct. 15. We expect the Treasury to rely on short-term cash-management bills to bridge the gaps created by the paydowns in regular bills.”


Lew Pressures Congress on Debt Limit With Deadline

September 25, 2013

Lew’s deadline is different from the dates provided by his predecessor, Timothy F. Geithner, during debt-limit talks in 2011, because Lew is giving himself a cushion of $30 billion, Crandall said.

For example, on April 4, 2011, Geithner sent Congress a letter saying extraordinary measures could give the Treasury “headroom” until about July 8. On May 2, Geithner said that because of “stronger than expected tax receipts,” the measures could extend borrowing authority until Aug. 2.

Lew’s Oct. 17 deadline “is the date on which Treasury runs out of the ability to raise new money, but he is not attempting to pick the subsequent date on which the Treasury will run out of cash,” Crandall said. “You can make objective forecasts about the former, while the latter is much more uncertain. He is telling us when we go to Code Red as opposed to predicting the date of fiscal Armageddon.”

The Financial Times

NY Fed tests repo facility for rate rise

September 23, 2013

The Fed may test reverse repos until the end of January and has scope to raise the fixed rate to a limit of 0.05 percentage points and increase amounts to $1bn for counterparties.

Lou Crandall, economist at Wrightson Icap, said with the end of the third quarter approaching next week, participation from eligible counterparties could grow as banks were reluctant to accept cash at such time that bloats their balance sheet.


Bullard’s comments on close September vote fail to sway Fed watchers

September 20, 2013

Lou Crandall, chief economist at Wrightson ICAP, said the trick for investors will be to “pay close attention to the Fed officials who give the appearance of trying not to mislead the market.”

Regarding Bullard’s comments, Crandall said the Fed’s decision in September “had better have been a close call or the series of speeches leading up to the meeting would be even more puzzling.”


Bernanke Resets Policy by Doing Nothing as Markets Soar

September 19, 2013

The decision to abstain from tapering bond purchases underscored Bernanke’s willingness to do anything to lower unemployment and pushed back expectations for a tightening of policy, according to  Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Bernanke said he was concerned that market interest rates, driven higher by his own suggestion he would scale back so-called quantitative easing, would curb growth.

“The overriding message the Fed wants to send is that it remains completely committed to providing as much support as necessary,” Crandall said. “ The Fed’s goal in surprising the market here was to really cement the credibility” of its interest-rate guidance by showing its primary concern is encouraging growth, he said.


Less Tapering Becomes Tighter Credit No Matter What Fed Says

September 17, 2013

Bernanke has stressed that any reduction in the amount of money the central bank pumps into the financial system each month doesn’t mean policy is getting any more restrictive. That message hasn’t been heeded by bond investors, demonstrating how hard it will be for the Fed to control long-term interest rates as it moves toward tightening, according to  Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

“Getting out of ultra-low interest-rate policy was never going to be easy, and this is a perfect illustration of why,” Crandall said. “It is possible that this will make it even harder because the market will be even more primed to view inflection points as messy and destructive, and therefore a reason to sell early.”

The Financial Times

Fed considers new repo tool to smooth policy exit

August 29, 2013

“If it is a narrow attempt to put a floor under the funds rate, it may not drastically alter the availability of funding in the repo market,” says Lou Crandall at Wrightson Icap. “If it is a broader effort to unify the market for bank reserves with the market for other high-quality liquid assets, the disintermediation effects will be much broader.”


Treasury Faces Coupon Conundrum With 5-Year Sale, Wrightson Says

August 19, 2013

With the  five-year  Treasury yielding 1.60 percent, selling the new security with a 1.5 percent coupon would be a strong possibility under typical circumstances. Should the government sell the note with that coupon, it would produce an overlap with the  seven-year note  sold by the department in August 2011 at a matching level with the same date of maturity, creating an unscheduled reopening, Wrightson chief economist Lou Crandall wrote in a research note published today.

As borrowing costs rise from the historic lows they reached in the wake of the financial crisis that began in 2007, the Treasury is likely to again face the possibility of new shorter-maturity securities with coupons and maturity dates matching those of already issued securities in coming years, Crandall wrote.


Obama Rejects Speculation Summers Has Fed ‘Inside Track’

August 10, 2013

It’s hard to make a case that Summers, Yellen or Kohn “clearly has a stronger reputation than the others” on inflation, said  Lou Crandall , chief economist at Wrightson ICAP LLC in  Jersey City , New Jersey. “Proponents of each individual might make subjective arguments on their favorite’s behalf.’

‘‘Of the three, Yellen is probably seen as the most focused on  unemployment issues ,” he said. “The common perception would probably be that Summers and Kohn have more experience with the financial bubble issues that the president cited.”


Fed Chairman Search Expanded by Obama Mention of Kohn

July 31, 2013

Unlike Janet Yellen and Lawrence Summers, two other candidates for the job, Kohn doesn’t come from an academic environment. After spending 40 years at the Fed, he’s more likely to be guided by experience than economic theory.

“He is a central banker,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “Yellen and Summers have acquired the policy-making experience needed to do the job, but they come originally from a different background.”

The Financial Times

US Treasury announces cut in debt sales

July 31, 2013

Lou Crandall, economist at Wrightson ICAP, said: “We suspect there may be room for more cuts in the fourth quarter.”


U.S. Paring Debt Sales Vindicates Anti-Austerity Since 2008

July 29, 2013

“There is no reason for them to wait,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said July 23 in a telephone interview in reference to the Treasury. “Once upon a time auctions ebbed and flowed from year to year. We’ve had an abnormally long period where we haven’t had that, and we still face long term challenges, but this would be a step back toward a normal path.”

The Wall Street Journal

Some See Fewer U.S. Debt Sales

July 29, 2013

Lou Crandall, chief economist of Wrightson ICAP LLC, said he looks for an initial reduction of $2 billion in the two-year note auction in August.


Recap: Bernanke's testimony in the Senate

July 18, 2013

“We still think the Fed is likely to start reducing the pace of its asset purchases in September, but Chairman Bernanke left the door wide open to the possibility that the Fed might wait until later,” said Lou Crandall, chief economist at Wrightson ICAP. 


Bernanke Seen Sticking to QE Tapering Plan After Jobs Report

July 5, 2013

Today’s report “reinforces the view that the Fed can get the first initial cutback in asset purchases out of the way in September without creating any presumptions about when the phase-out process will end,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, who projected a gain of 190,000 for June payrolls.

The Financial Times

Payrolls reaction presages storms ahead for investors

July 5, 2013

“Asset managers holding a mix of Treasuries and riskier instruments stood to profit on both parts of their portfolio,” says Lou Crandall at Wrightson ICAP.

That is now history and why no one, especially policy makers, should be surprised by volatility across markets, with the potential for a lot more to come.

Mr. Crandall says the Fed “now needs to cope with the fact that each bit of bad news about tapering will be a lose-lose phenomenon for investors on the way down”.

The Financial Times

Central banks sell record sums of US debt

June 28, 2013

“We can only speculate at this point about which countries were selling, and what maturities were being unloaded,” said Lou Crandall, economist at Wrightson ICAP. “One obvious possibility is that emerging market nations whose currencies have been under heavy pressure sold shorter-dated Treasuries for intervention purposes.”


Obama Said Not to Have Begun Bernanke Replacement Search

June 19, 2013

“They don’t want to announce his replacement early enough to undermine his control of the process,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, a unit of ICAP Plc, the world’s largest broker of financial transactions between banks. “There are benefits to delaying the official beginning of the transition process.”


Obama Says Bernanke Has Been at Fed 'Longer Than He Wanted'

June 18, 2013

“He has bridged the gap between academic analyses of monetary policy and the practical requirements of a running a central bank,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “He is in a unique position to redefine the way we think analytically about how monetary policy operates in the real world and to do it in a way that other academics will have to pay attention to.”


Central Banks' Failure to Communicate Boosts Bond Yields

June 17, 2013

Bernanke may be “trying to help the market build up immunity” to future Fed actions with his suggestion that the central bank could cut back on its bond buying, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “This is a little verbal vaccination.”


Drop in Job Openings Tempers U.S. Hiring Prospects: Economy

June 11, 2013

“We’re still stuck in this labor market where employers don’t have a lot of conviction,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “You’re still talking about levels that are bouncing around in a range without a whole lot of upward tilt to it.”


Bernanke Says Premature Fed Tightening Would Endanger Recovery

May 22, 2013

Fed officials “need to see inflation expectations remain in a desired range, they need to see that the peak home-buying season goes as well as it can, and they need to see that we have absorbed the bulk of the huge fiscal consolidation” before they reduce the pace of purchases from $85 billion a month, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.


Live Blog and Video of Bernanke's Testimony to Congress

May 22, 2013

Lou Crandall, chief economist at Wrightson ICAP, said the Fed is trying to keep markets from pricing in a complete elimination of QE at the first sign of cutback.

Financial Times

Risk to U.S. Treasury market as debate grows on end of QE

May 16, 2013

Lou Crandall, economist at Wrightson ICAP, says the Fed may start cutting its monthly bond purchases as early as July, in the event that monthly payrolls register growth beyond 200,000.

“Starting this July would not preclude the Fed from still buying bonds the following July,” says Mr Crandall. “The key thing is that the Fed wants to avoid a sense of inevitability and get away from a predictable glide path for ending QE.”

The Wall Street Journal

Economic Road Clearing, but the Going Is Slow

May 12, 2013

"Headwinds and tailwinds are canceling each other out," said Lou Crandall of the economic research firm Wrightson ICAP.

The Wall Street Journal

Treasury Declines to Provide Debt-Limit Estimate

May 1, 2013

Lou Crandall, chief economist at Wrightson ICAP, estimates that a special dividend payment from Fannie Mae would give the Treasury leeway into October.


Consumer Confidence in U.S. Rose More than Forecast in April

April 30, 2013

Manufacturers are more optimistic about sales and spending this year than they were at the end of 2012, while service providers were less upbeat, according to results of a semiannual survey by the ISM issued today.

“We’re not seeing anything tailing off drastically,” said Lou Crandall, chief economist at Wrightson Icap LLC in Jersey City, New Jersey, and the top forecaster for the MNI Chicago Report. “We’re just fighting through another sluggish period.”

The Wall Street Journal

Treasury to Pay Down Debt for First Time in Six Years

April 29, 2013

Lou Crandall, chief economist at Wrightson ICAP, estimates that the Treasury could stay under the limit at least until early September, and possibly as late as early October, based on current spending and revenue patterns.

The Wall Street Journal

Tax Filing Is Slow, But Collections Rise

April 15, 2013

Lou Crandall of Wrightson ICAP, a financial forecasting firm, said he expects non-withheld payments to be up by as much as 30% during the April tax-filing season.

The Wall Street Journal

Fed Flub Sparks New Data Concerns

April 10, 2013

Some of the biggest banks and investment firms on Wall Street were among those that received minutes of the Federal Reserve's latest policy meeting 19 hours before the market-sensitive document was released.

The release is "a pretty big flub" for the Fed, said Lou Crandall, an economist at Wrightson ICAP LLC, a market research firm. "The minutes are often market-moving and you want to have a controlled process for that."


Fannie Mae Profit May Swell Treasury Coffers as Debt Limit Looms

April 8, 2013

President Barack Obama in February signed legislation temporarily suspending the $16.4 trillion debt limit through May 18. The Treasury has said that after that date it can use so- called extraordinary measures to maintain borrowing ability.

Those steps should give the Treasury borrowing room until late August or early September, said Lou Crandall, chief economist at Wrightson Icap LLC in Jersey City, New Jersey.

The Financial Times

All eyes on Bernanke's exit strategy

March 19, 2013

“There is no doubt that the normalisation process will put pressure on financial markets,” says Lou Crandall, economist at Wrightson Icap. “We suspect that the market psychology response to the prospect of Fed tightening will be abrupt and painful before the Fed even makes any substantive changes.”


Fed's outlook could be key to meeting

March 19, 2013

The key question is whether the Fed’s new forecast for the unemployment rate for 2014 would encompass the 6.5% threshold for considering a rate hike, said Lou Crandall, chief economist at Wrightson ICAP.

“If so, the fed funds futures market would give much greater weight to the risk of a rate hike in the first half of 2015 than it currently does,” Crandall said in a note to clients.

The New York Times

To Reassure Investors, Fed Stresses It Will Not End Stimulus

March 17, 2013

“The Fed will not take overt steps to scale back its asset purchases any time soon,” Lou Crandall, chief economist at Wrightson ICAP, a New York-based financial research firm, wrote last week. “The Fed is not going to take any chances until it is sure that we have avoided another spring/summer swoon.”


Jobless Claims Unexpectedly Fall as U.S. Labor Market Improves

March 14, 2013

The number of people filing claims for jobless benefits averaged 346,750 over the past four weeks, the lowest level since March 2008, according to data today from the Labor Department in Washington.

“This is better than we could have expected,” said Lou Crandall, chief economist at Wrightson Icap LLC in Jersey City, New Jersey, and the second-best forecaster of jobless claims for the past two years, according to data compiled by Bloomberg. “We’re slowing the pace of layoffs, which is a good first step. Things appear to be improving.”


Fed to Release Statement Projections on March 20 at 2 PM

March 13, 2013

“It makes sense to have a shorter period between the time a policy change is announced and Chairman Bernanke’s explanation,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. It’s “shortening the period of uncertainty between the statement and press conference.”


Surging Foreign Bank Reserves at New York Fed Won't Alarm

March 6, 2013

The increased availability of dollar funding to European institutions reflects greater confidence in the continent’s banking system and in the resolution of its sovereign-debt crisis, according to Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Foreign banks have aided the Fed in funding its prior two rounds of quantitative easing, and their renewed access to dollar reserves is providing the U.S. central bank with a bigger outlet to fund its third asset- purchase program without risking distortions, he said. While the Fed's dealings with foreign banks since the crisis have proved politically controversial, the increase in reserves shouldn't be, Crandall said. "The Fed isn't doing anybody any favors."


Index of U.S. Economic Indicators Rose in January

February 21, 2013

"Activity was on the rise in part because of spillover effects from the ongoing housing recovery,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said before the report. Crandall is the top-ranked forecaster of the index for the past two years, according to data compiled by Bloomberg. At the same time, “you’ve got a sequence of budget- related concerns hanging over the consumer spending outlook,” he said.


Fed Easy Credit Becomes Inside Debate Focusing on Escape

February 11, 2013

"The market is always looking for the next big thing," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. "Once the Fed stops buying assets, everybody knows what the next big thing is: the beginning of the exit cycle."


Service Industries in U.S. Probably Maintained Momentum

February 3, 2013

The economy has “gotten through this period of uncertainty reasonably well,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. The data are “consistent with moderate business expansion.”


Bernanke still chasing the elusive recovery

January 28, 2013

“We need to have businesses take risks again,” said Lou Crandall, chief economist at Wrightson ICAP.


Debt-Limit Vote in House Refocuses Republican Cuts Plan

January 23, 2013

Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, told Bloomberg BNA in an e-mail that the Treasury “might not need another permanent increase until August.”


Default Drama Is No Way to Run a Country

January 9, 2013

Once Standard & Poor’s put the U.S.’s AAA rating on credit watch on July 14, stocks went into the tank and Treasuries ignored the downgrade threat, which became a reality on Aug. 5.

“The bond market has its own credit-rating system,” Crandall said.


Rich Gain as Companies Seek to Beat Obama Tax Increases

December 10, 2012

More than 150 companies, from Costco Wholesale Corp. to Las Vegas Sands Corp. (LVS), have declared special dividends totaling about $20 billion this quarter to avoid anticipated tax increases in 2013, according to data compiled by Bloomberg. Others, including law and private-equity firms, probably will pay bonuses, partnership distributions and commissions early for tax reasons, according to Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

“We’re going to have a big jump in household income in the fourth quarter” said Crandall, whose company is a subsidiary of ICAP Plc, the world’s largest broker of transactions between banks. “It’s going to be in excess of $50 billion.”

The New York Times

Fed Is Likely to Sustain Its Stimulus Program

December 9, 2012

Lou Crandall, chief economist at the research firm Wrightson ICAP, noted in a recent analysis that the unemployment rate exceeded 7 percent in the mid-1980s and again in the early 1990s, and in both cases the Fed waited until the rate fell well into the 6 percent range before it began to raise interest rates.


Fed Exit Plan May Be Redrawn as Assets Near $3 Trillion

December 7, 2012

Fed officials haven’t publicly discussed an alternative plan for shrinking the balance sheet. One possibility, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, would be to enlist the help of the U.S. Treasury.

The Fed could ask to swap longer-term Treasury debt for short-term bills and notes, thus reducing the maturity of its portfolio to accelerate the runoff. The Fed and Treasury could do this partly in a one-time swap, and partly by allowing the Fed to bid on new issues and pay with its holdings of long-term Treasuries, Crandall said.


Housing Revival Boosts Outlook for U.S.

October 18, 2012

Consumer confidence rose to a six- month high and an index of U.S. leading indicators climbed as a nascent housing recovery started to ripple through the world’s largest economy...

“This is just an echo of yesterday’s very strong permits numbers, which were very encouraging,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, who correctly forecast the increase in the leading index. In addition, “the change in the tone of the housing sector seems to be what’s driving the improvement in consumer sentiment,” he said.


Fed’s next move: Buy more Treasurys

September 26, 2012

Lou Crandall, chief economist at Wrightson ICAP, agreed, saying the purchases would commence in the first quarter unless there was a “remarkable” turnaround in the labor market.

“We think the FOMC has established $85 billion of combined net purchases as its initial baseline, and would not expect much change in the first quarter if the employment data remain as sluggish as generally anticipated,” Crandall said in a note to clients.


Expectations ramp up for QE3 — but maybe not now

September 11, 2012

The central bankers will try to put a more positive spin on the guidance by stressing that a longer period of interest rates close to zero is not a sign that the economy is going to be flat on its back for three more years, said Lou Crandall, chief economist at Wrightson ICAP.


Fed Moves Toward Open-Ended Bond Purchases to Satisfy Bernanke

September 3, 2012

Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said the Fed’s statement at the conclusion of next week’s meeting may take a step in better describing what economic conditions would prompt the Fed to begin raising interest rates.

The minutes suggested that the committee could signal it would keep rates low “even as the recovery progressed,” Crandall said.

“They are likely to have a very strong preference of having a way to bolster that guidance without taking the brute force solution of extending it even farther into a nebulous future,” Crandall said


One Fed tool that gives Wall Street heartburn


July 25, 2012

“Eliminating interest on reserves would likely do more harm than good,” added Lou Crandall, chief economist at Wrightson ICAP LLC, in a report.

The Financial Times

New US repo futures could take Libor as benchmark

July 17, 2012

Lou Crandall, economist at Wrightson Icap, said: “The structure of the product will be very similar to the existing fed funds futures contract, except that the underlying reference rate will be derived from a market that is larger, more volatile and of immediate financial significance to a larger number of potential participants than fed funds.”


Bernanke to suggest Fed on dovish course

July 16, 2012

While Bernanke is expected to stop short of giving markets a timetable of further easing, he will “express a degree of concern” about the economy and a “level of commitment” to bring down the unemployment rate that will suggest the Fed is likely to start a new asset purchase program sometime this year, said Lou Crandall, chief economist at Wrightson ICAP.

That message got lost in the minutes of the Federal Reserve meeting which disappointed the stock market’s desire for instant gratification, Crandall said.

“It may find Chairman Bernanke’s semi-annual monetary policy report this week more to its liking,” Crandall said.


Fed Signals Support for Further Stimulus If Economy Slows More

July 12, 2012

Lou Crandall, chief economist at Wrightson ICAP LLC, said the committee’s discussion of potential costs to the functioning of the more than $10.5 trillion Treasury market opens the door to renewed purchases of mortgage-backed securities.

“If you want to spread the impact, then you add another market,” Crandall said.

Bloomberg Businessweek

Bernanke Signals More Easing Likely if Job Growth Wanes

June 21, 2012

In April, the FOMC said it “will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.” That language was two- sided because the committee could also shrink the balance sheet to keep prices stable, Crandall said.

In their statement yesterday, policy makers pledged “further action as appropriate” to promote a stronger recovery and “sustained improvement” in the labor market, a one-sided bias toward further easing, Crandall said.

The New York Times

With Risks for Growth Still Hazy, Fed to Weigh New Aid

June 19, 2012

"While the Fed hates being held hostage by market expectations, we doubt it will be prepared to disappoint global investors this week," Lou Crandall, chief economist at Wrightson ICAP, wrote in a note to clients Monday.

The Financial Times

Bondholders look for word of more help from Fed

June 6, 2012

“We think any additional bond buying is likely to be presented as an insurance policy against the risk of further downside surprises,” says Lou Crandall, economist at Wrightson ICAP.

The Daily Star (Lebanon)

Growth slowdown in U.S. as recession dodged

June 4, 2012

The average price of regular unleaded gasoline fell to $3.61 a gallon on May 31 from a 2012 high of $3.94 on April 5, according to AAA, the nation’s largest motoring group, as oil demand ebbed with the slowing world economy.

“We’re benefitting from a global drop-off in commodity prices,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.


Dimon as New York Fed Director Renews Concern About Conflicts

May 15, 2012

“The fundamental question is whether you want to have financial services executives on district bank boards?” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “If you think there is a role, I don’t think this would rule Jamie Dimon out as an industry representative.”

The Financial Times

US delays introduction of floating rate notes

May 2, 2012

“Bills are a more widely used reference rate in the market, and would be the safe choice for the Treasury,” said Lou Crandall, economist at Wrightson Icap.

He said it was too early to use the government collateral repo index recently created by the Depository Trust & Clearing Corp.

“The index is attractive in theory, but it doesn’t have a long track record yet and the market is just beginning to trade financial instruments tied to it,” said Mr Crandall. “Repo-linked floaters would be a gamble for the Treasury at this point.”

BNA – Daily Report for Executives

‘Lame Duck’ Session May Bring Issues; Debt Limit Showdown Not One, Analysts Say

April 25, 2012

“My preliminary read is that there is no reason at this point to change the forecast that round 1 of the debt ceiling hits in December (probably Dec. 31), and that extraordinary measures carry the Treasury until sometime in February or maybe even March,” said Lou Crandall, chief economist with analytical firm Wrightson ICAP in an email to BNA April 24.

Hellenic Shipping News

Bernanke’s goal: Keep out of the corner

April 25, 2012

On the inflation front, oil prices have stabilized recently, which should allow the Fed to stick to their forecast of stable inflation, noted Lou Crandall, chief economist at Wrightson ICAP.

Crandall said he doesn’t expect much change in the Fed’s forecast of the appropriate path of interest rates. Crandall said he expects six FOMC members to say the Fed should hike rates before 2014, while another half-dozen will say the central bank can wait until 2015 or 2016 before raising rates.


Cost of Untraded U.S. Debt Undermines Low Yields

April 23, 2012

The biggest holder of nonmarketable U.S. debt, the Social Security Trust Fund, tends to select securities with longer maturities, which carry higher yields, said Louis Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

“The average maturity of those instruments is longer than the average maturity of the debt, which means over time the interest expense will be somewhat higher,” Crandall said. “They have very few of these two-year Treasury notes at 0.25 percent that the Treasury is issuing to the rest of the world.”


Job Openings in U.S. Increase as Hiring Rises

April 10, 2012

“A higher volume of quits leads to a higher number of hiring” as companies need to replace workers, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “The quit rate is usually a sign that people are finding better jobs. This is an important component of any self- sustaining expansion.”

BNA – Daily Report for Executives

U.S. Could End 42-Month Deficit Streak in April, Analysts Say

April 9, 2012

Crandall said making up the size of the deficit in April 2011 would be “a challenge,” but it was not impossible. Non-withholding tax receipts, the kind likely to be made at this year's April 17 deadline, have been up about 20 percent so far this year, he said. But payroll tax receipts have grown much slower, despite an improved jobs picture, Crandall said.


BNA – Daily Report for Executives

Urge to Replace Automatic Spending Cuts Not Drawing Wall Street

April 5, 2012

While the yield on the 10-year Treasury note has traded above 2 percent recently, Lou Crandall, chief economist with analytical firm Wrightson ICAP, said that was likely due to other issues, not worry over what Congress may do with the sequester.

Crandall told BNA March 30 that issues like Europe's fiscal situation, a stronger U.S. economy and worries about the Federal Reserve had “blotted out” any worries about Congress tinkering with the sequester.

“I'm not saying the market's right to be ignoring this. Not at all,” he said. Market participants see the back-and-forth over the budget now as “preliminary posturing,” he said.

Business Report

Unless Treasury acts, four numbers add up to a US debt disaster

April 1, 2012

The Treasury isn’t unaware of the rollover risk. At the same time, it’s trying to accommodate the increased demand for “high-quality liquid assets”, such as Treasury bills, as required under new international capital-and-liquidity standards, says Lou Crandall, the chief economist at Wrightson ICAP in Jersey City, New Jersey.

In fact, when Treasury bills carry a negative yield – when investors are paying the government to hold their money for three, six or 12 months – borrowing “more is better”, Crandall says.


Bernanke Says Central Banks Should Defuse Financial Threats

March 29, 2012

Fed officials may still not use interest-rates as a first tool to pop a bubble, said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.

“They have seen the costs of ignoring incipient bubbles can be unacceptably high,” said Crandall. Fed officials “have a variety of other resources” they can bring to bear against bubbles before using monetary policy, which is likely to be reserved for the objectives of stable prices and full employment, Crandall said.

The Wall Street Journal

A TARP Auction Loss for Treasury

March 29, 2012

Lou Crandall, chief economist of Wrightson ICAP, said that while TARP shouldn't be judged on individual transactions, the $50 million auction loss announced Thursday likely reflects the fact that banks that could exit the TARP program early did so, and the ones still in the program have generally had trouble coming up with a capital plan that would support an exit.

He said TARP succeeded in providing "blanket coverage for a financial system where you didn't know exactly where the deepest problems would be."


Bernanke Hesitates to Extol Economy Knowing Policy Put at Risk

March 25, 2012

“The market focuses on direction and growth rates” of the economy, while “the Fed focuses on levels,” such as unemployment, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “Year in and year out, that’s one of the most fundamental sources of miscommunication. The Fed cares about the gap.”


Bernanke seen accepting faster inflation as fed seeks jobs boost

March 7, 2012

Policy makers at a March 13 meeting probably won’t deviate from their commitment to hold the main interest rate close to zero at least through late 2014, even if their forecast shows a burst of energy-driven inflation, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. They’ll probably be more concerned that rising prices will hold back real spending, impeding growth and improvement in the job market, he said.

“The chairman said, ‘We think it is transitory, we are sticking to our guns, we are going to focus on the drag on income,’” Crandall said. Bernanke explained in his testimony how under a strategy of flexible inflation targeting, “a temporary spike in the price indexes can be a reason for the central bank to be more generous rather than less,” Crandall said.


Fed Says Key Interest Rate Will Stay Low Until Late 2014

January 25, 2012

“Europe is the reason” Fed officials are considering buying more bonds to boost the economy, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

“You want to gain as much momentum as you can in case another storm hits,” Crandall said. “They are worried about the lack of a catalyst in the U.S. to get us to escape velocity” of self-sustaining growth.

The Financial Times

Investors nervously await Fed rates forecasts

January 25, 2012

“It is possible that structural changes in the financial system and regulatory environment will nudge the equilibrium rate back down . . . but our guess is that it is still above 4.5 per cent,” said Lou Crandall, economist at Wrightson ICAP.

The Financial Times

Records of Bank policy meetings destroyed

January 23, 2012

Current officials may wince at the failure to spot impending disaster, but Mr. Crandall believes that the Fed’s 2006 transcripts, released this month, show why they are so valuable.

“The self-congratulatory tone is testament to the complacency that will settle in when you go nearly 15 years with one mild recession,” he said. “The transcripts may help future policymakers avoid falling into the same trap.”

The Financial Times

Central banks’ appetite for US Treasuries wanes

January 19, 2012

“It would appear that other nations besides China have been reducing their holdings of Treasuries at the Fed,” says Lou Crandall, economist at Wrightson Icap. “Still, the turnaround in the growth rate of China’s currency reserves since the summer helps explain the change in the trajectory of the custody accounts.”

The Financial Times

Foreign central banks cut US Treasuries

December 30, 2011

“Once upon a time, foreign official institutions were more likely to boost the amount of Treasury debt held at the Fed on the eve of major reporting dates,” said Lou Crandall, economist at Wrightson ICAP. “Whether due to underlying investment patterns or to changes in custodial arrangements, foreign holdings of Treasuries at the Fed are now more likely to shrink than expand at the end of the quarter.”


Obama to Seek $1.2 Trillion Increase in Debt Limit

December 27, 2011

Congress will be notified under the terms of a deal to raise the limit worked out on Aug. 2 after a more than two-month standoff between the administration and Republican lawmakers that was followed by a cut in the U.S. debt rating by Standard & Poor’s. The Budget Control Act of 2011 gives Congress 15 days to pass a joint resolution disapproving the increase in the limit. The president can veto such a measure. “This process was intended to avoid any further political wrangling” and “make it virtually impossible to derail the final $1.2 trillion,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

National Post

Bernanke prods savers to become consumers

December 21, 2011

Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, is even more optimistic than Sinai. Crandall - the most-accurate forecaster of the U.S. economy as of Dec. 1, based on Bloomberg calculations - predicts growth next year of just over 3 percent, as companies become more confident about the outlook and expand their businesses.


Dollar Status Grows as Foreign Banks Double Deposits at Fed

November 21, 2011

“With the heightened emphasis on stronger liquidity positions for financial institutions around the world, we’ve seen an increase in the regulatory demand for liquid assets, but we’re not necessarily seeing an increase in the supply of liquid assets,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, a unit of ICAP, said in a Nov. 14 interview. “They’re meeting that need by holding Fed balances.”


U.S. Raises Borrowing Needs Estimate on Spending, Lower Revenue

October 31, 2011

The outlook for Treasury borrowing depends in large part on congressional action, economists said, citing the Nov. 23 deadline for the super committee charged with cutting at least $1.2 trillion from the budget deficit. In the fiscal year ended Sept. 30, the government reported the second-highest annual deficit on record, $1.3 trillion. “It all depends on what the budget talks come up with,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, said before the borrowing statement was released.

The Financial Times

US Treasury considers new debt security

October 23, 2011

“We think the case for diversifying the Treasury’s funding sources by introducing [floating rate notes] is very strong in light of the prospect of persistently large budget deficits in the years ahead,” said Lou Crandall, economist at Wrightson ICAP. “They would give the Treasury an additional tool for meeting unexpected increases in borrowing needs that would neither place upward pressure on long-term rates nor add to the government’s near-term rollover needs.”

“The need for safe, short-term dollar-denominated assets is likely to exceed the supply for as far as the eye can see,” says Mr. Crandall.

BNA – Daily Report for Executives

Treasury Seeks Primary Dealer Input on Floating Rate Notes, Negative Bidding

October 17, 2011

“If something is trading at a negative yield, the obvious response for the issuer is to sell more of it,” said Lou Crandall, chief economist at Wrightson ICAP. “But on the other hand, the Treasury doesn't want to get into a pattern of relying excessively on very short-dated bills that need to be rolled over.” Therefore, floating rate notes could offer a compromise by paying a yield similar to bills, but with a longer maturity. That would minimize fears of Treasury increasing its rollover burden while still meeting demand, Crandall told BNA.

The Wall Street Journal

Inside the Fed Fight Over Bond Buys

October 13, 2011

Minutes of the Sept. 20-21 meeting of the policymaking Federal Open Market Committee, released Wednesday after the customary lag, showed officials had conversations—in which they disagreed often—about what to do next. "They're aggressively investigating their options," said Louis Crandall, an economist at Wrightson ICAP LLC, a money-market brokerage.

BNA – Daily Report for Executives

As Attention Shifts to Jobs, Budget Deficit Likely to Stabilize

October 6, 2011

According to the CBO's August budget update, the 2011 deficit was projected to come in at about $1.284 trillion, a $10 billion narrowing, or about 8.5 percent of GDP. Lou Crandall, chief economist with analytical firm Wrightson ICAP, estimated in a recent note to clients he expected the 2011 deficit to total about $1.275 trillion.


Bernanke’s Twist May Be Hampered by Geithner’s Bond Selling

September 26, 2011

“The Fed is worried about the U.S. becoming Japan, while the Treasury is worried about the U.S. becoming Greece,” said Louis Crandall, chief economist at Wrightson ICAP LLC, whose Jersey City, New Jersey-based company is a unit of ICAP Plc, the world’s biggest broker of trades between banks.

The Wall Street Journal

Fed Launches New Stimulus

September 22, 2011

The Fed faces another challenge: For the past year, the U.S. Treasury, run by former New York Fed president Timothy Geithner, has been working at cross purposes with the central bank. While the Fed has been trying to reduce the supply of long-term government bonds in the hands of the public, the Treasury has been increasing that supply, diluting the impact of the Fed's policies. In 2009, for instance, the U.S. Treasury issued $371 billion worth of debt with maturities of 10 years or more; in 2010 it increased that to $433 billion and the issuance is projected to be about the same this year, said Louis Crandall, an economist at Wrightson ICAP LLC, a money-market brokerage.

The New York Times

Fed Runs Risk of Doing Less Than Investors Expect

September 19, 2011

"There is no reason for the Fed to rush," Lou Crandall, chief economist at Wrightson ICAP, wrote in a recent note to clients predicting such an outcome. "It is in the Fed's interest to milk the anticipation effect as long as possible."


U.S. Banks Said to Seek Relief From Regulators as Deposits Swell

August 26, 2011

Relaxing the rules or enforcement could be a slippery slope, said Lou Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based unit of London-based ICAP Plc, the world’s largest inter-dealer broker. “Asking for a free pass on the leverage ratio for bank deposits by itself isn’t something that regulators would consider,” Crandall said. “The question is whether banks should be able to exclude reserve balances since they are a risk-free asset.”


Bernanke Seizes Day to Lower Bond Yields as Congress Shirks

August 12, 2011

“This is aimed at encouraging people to leverage up, with the knowledge that their borrowing costs will likely be very low for a long period of time,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

USA Today

Is the economy headed for a double-dip recession?

August 7, 2011

A month ago, Wrightson ICAP chief economist Lou Crandall was optimistic that the economy was on a path toward solid growth in the second half of the year. Now, he says, he's become more concerned, in part because of a negative shift in sentiment. If corporate managers fear that the economy is slowing, they'll cut back on capital expenditures and put off hiring. While he remains "cautiously optimistic," he says, "we're back in a period of maximum uncertainty."

The Wall Street Journal

Strains Ease on Short-Term Credit Markets

August 3, 2011

Haywire short-term lending markets were a hallmark of the financial crisis, when big banks like Lehman Brothers and Bear Stearns faced runs in which their short-term funds dried up. The strains of the past few days "seem to have peaked," said Louis Crandall, an economist at Wrightson ICAP.

The federal funds rate, the rate that banks charge each other for overnight loans and the one that the Federal Reserve targets, has been a part of the recent roller-coaster ride in short-term lending markets. On Tuesday, it finished at 0.16%, according to Wrightson ICAP LLC, a money market brokerage, after jumping to 0.18% Monday from near zero just a few days earlier. The Fed has been targeting a range of 0% to 0.25%. It doesn't set the rate directly, but manages it by moving money into and out of the banking system.

Agence France Presse

US has room to move on debt deadline: analysts

July 26, 2011

Wrightson ICAPsaid they think August 15 is "the critical deadline from a cash-flow perspective."

"It still looks as though they'll have enough cash in August to fund operations into the second week of the month," their chief economist Lou Crandall said.

The Economist


July 23, 2011

Then there is the impact of a ratings downgrade. Money-market funds, which hold $684 billion of government and agency securities, are allowed to hold government paper that has been downgraded a notch. Other investors, such as some insurers, can only hold top-rated securities but their investment boards are likely to approve requests to rewrite their covenants, especially if a lower rating looks temporary. “It would be a full-employment act for lawyers,” says Lou Crandall of Wrightson ICAP, a research firm. There’s a surprise.

Associated Press

S&P says it would cut US credit rating to its lowest level if borrowing limit not raised

June 30, 2011

That's also what Wall Street expects, said Lou Crandall, chief economist at Wrightson ICAP.

"There's a recognition that a deal won't get done until the last minute," Crandall said. "As long as the deal gets done, it's not going to have a lasting impact on interest rates or the Treasury's ability to borrow."

Saigon Times Daily

U.S. debt deadline unlikely to deviate much

June 29, 2011

Analysts echoed the administration’s interim projections.

“The Treasury’s cash balance following the June quarterly tax date is slightly stronger than we expected, which may buy the Treasury a few extra days in August, research firm Wrightson ICAP said in a note to clients.

USA Today

Fed meets today amid uncertain economy; Has U.S. lost its footing on the path to growth?

June 21, 2011

But other forecasters argue that the economy isn't as weak now as many think. Lou Crandall, chief economist at Wrightson ICAP, says first-quarter gross domestic product gains were more robust than the official numbers indicate.

While Crandall concedes that growth slowed in the second quarter, he says the reality is that the economy is simply going through a temporary speed bump. The economy may not be surging, but it's not tipping into another recession.

"This is a two-month problem that we have right now," he says. "We've had one weak employment number. That's why I'm cautiously optimistic" about a second-half rebound.

National Public Radio

Fed Stimulus Ends Soon; Do We Still Need It?

June 19, 2011

Economist Louis Crandall, of Wrightson ICAP, concedes that by flooding the markets with money, the Fed probably lowered mortgage rates a bit. But, he says:

Mr. LOUIS CRANDALL (Money Market Analyst, Wrightson ICAP): The cost of this is that we've set a really ghastly precedent.

ZARROLI: Crandall points out that by buying Treasury bonds, the Fed is essentially lending the government money. That's not a big problem now because interest rates are low, and there are plenty of people who want to buy U.S. government debt. But he worries that if conditions tighten, the Fed may come under pressure to buy more debt as a way of helping the government solve its budget problems.


Imprecise data skews economic view: top forecaster; Soft patch didn’t start in first quarter, despite what GDP says

June 13, 2011

The economy actually grew at a healthy clip in the first three months of the year, despite a low 1.8% reading for gross domestic product, said Lou Crandall, chief economist for Wrightson ICAP and the winner of the May Forecaster of the Month Award from MarketWatch. The downturn isn’t five months old, but just two, he said, arguing that the GDP figures are misleading.

“When GDP is at odds with everything else you know, it’s time to pay to attention to everything else, rather than to GDP,” Crandall said in an interview. The first quarter was not weak, he insists: Payroll growth was the best of the recovery, the Institute for Supply Management factory index hit a 27-year high, manufacturing output was strong, business and consumer confidence were up, and profits were “exceptionally strong.”

Bloomberg News

U.S. House Defeats Debt-Limit Bill Democrats Call ‘Charade’

June 1, 2011

Yesterday’s vote won’t fan worries among bond traders that the U.S. may default on its obligations because “the markets are used to considerable amount of theater before any major debt-ceiling debate,” said Lou Crandall, chief economist for the Wrightson ICAP LLC unit of London-based ICAP Plc, the world’s largest broker of trades between banks.

“People generally assume” that “these sorts of issues won’t come to a head just before the projected deadline,” he said in a telephone interview. “That’s still a couple of months off,” so “no one is anticipating an action at this point.”

Bloomberg News

Fed Gave Banks Crisis on Secretive Loans Low as 0.01%

May 26, 2011

Records of the 2008 lending, released in March under court orders, show how the central bank adapted an existing tool for adjusting the U.S. money supply into an emergency source of cash.

One effect of the program was to spur trading in mortgage-backed securities, said Lou Crandall, chief U.S. economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a research company specializing in Fed operations.

ST OMO aimed to thaw a frozen short-term funding market and not necessarily to aid individual banks, Crandall said


Analysis - Some of Treasury's debt limit gains may aid Fed

May 13, 2011

"When the Fed starts to drain reserves, it's an awfully big number, and the Fed's own tools may have limited capacity," said Louis Crandall, chief economist at Wrightson-ICAP in Jersey City, New Jersey.

Crandall said some of the securities sold by the Fed in reverse repos may have limited appeal for banks, while the Treasury bills sold for the SFP are a universal currency for money markets.

Dow Jones Chinese Financial Wire

Bernanke Succeeds By Not Failing In First Press Event

April 27, 2011

Bernanke was most likely mindful of the fact this would be a quiet spot to start, says Lou Crandall, chief economist of Wrightson ICAP. 'I think he wanted to keep it low-impact' in part because of the fears an event like this could be the source of market volatility.

The central bank chief's performance Wednesday shows 'sometimes these things can be nonevents,' Crandall said. That's important because the next time this will happen in late June, 'there will be more pressing issues' to deal with.

The Wall Street Journal

Markets Get Ready to Navigate Fed's Departure - For Policy Makers, Ending Easing Is the Easy Part

April 25, 2011

One early step the Fed might take is ending the practice of reinvesting proceeds when the Fed's Treasury and mortgage securities mature or are paid off. This would effectively shrink the Fed's portfolio, amounting to a slight tightening of policy.

Louis Crandall, a money market analyst with Wrightson ICAP LLC, estimates that $15 billion of mortgage debt would run off the Fed's balance sheet monthly in the second half of the year if not reinvested, and $5 billion of Treasury securities would run off and $25 billion in total per month in 2012 would run off.


Fed's own forecasts move to center stage

April 4, 2011

"This is an effort to move the forecasts front and center," said Lou Crandall, chief economist at Wrightson ICAP.

The Fed will release the projections on the same day that Bernanke talks to the press. The past practice had been to delay release of the forecasts until three weeks following the meetings.

"Getting more details about the forecasts when they are hot off the press may make them more relevant for the market," Crandall said.

The Wall Street Journal

Banks Face Borrowing Stigma; Publicly Released Details of Fed Lending Could Show 'Weakness,' Say Some

April 1, 2011

Lou Crandall, chief economist at research firm Wrightson ICAP, said the details released Thursday "will send discount-window activity into a deep freeze for at least a generation." Headlines about banks "milking" the government for cash during the crisis will persuade banks to stay away from the window.


On the Brink of a Breakout?

March 7, 2011

The BLS reported that, before seasonal adjustment, February's nonfarm payroll gain ran not at 192,000, but 816,000, a figure that rivals not-seasonally-adjusted gains in February 2005 and February 2006-years when increases after seasonal adjustment were much higher than 192,000. In fact, according to the calculations of Wrightson ICAP's chief economist, Louis Crandall, the seasonally adjusted gain last month would have exceeded 300,000 had last year's seasonal factors been used.

Associated Press

Deficit is biggest as share of economy since WWII

February 15, 2011

Economists say that if investors trust that Congress and the White House will curb budget deficits over the long haul, interest rates could stabilize -- even if deficits exceed $1 trillion over the next year or two. But if investors lose confidence that Washington policymakers can curb the deficits, rates could rise sharply.

"It's all about perception," says Lou Crandall, chief economist at Wrightson ICAP, a research firm.

The Wall Street Journal

Fed Hoards $1 Trillion In Treasurys

January 31, 2011

...even if the Fed's bond-buying program ends as planned in June, the Fed may have to keep purchasing significant amounts of Treasurys for some time. If it did nothing, about $200 billion to $300 billion in Treasurys and mortgage-backed securities would mature annually starting in 2012, estimates Lou Crandall, chief economist at Wrightson ICAP.


Fed wording on inflation could be key

January 26, 2011

Wrightson ICAP chief economist Lou Crandall said the central question for today's meeting is whether the Fed changes the language about inflation from the previous statement in December, when officials said measures of underlying inflation "continued to trend down."

In the December statement, the Fed stressed that "measures of underlying inflation are somewhat low" compared with its implicit inflation target of 2% or a bit below. Crandall said he expects the Fed to leave this language untouched.


Fed says inflation still trending down despite commodity prices; Unanimous Fed holds policy steady

January 26, 2011

Lou Crandall, chief economist at Wrightson ICAP, said the major challenge for the Fed in coming months will be to forestall premature tightening fears. Futures traders are slowly increasing bets that the Fed could begin raising interest rates by the end of the year. Read about investor bets on Fed policy.

Dow Jones Chinese Financial Wire

DJ Treasury Prices Push Up; State Of The Union Address In Focus

January 25, 2011

Fed officials of late have suggested inflation trends have been bottoming out, so tweaking that language would make sense. Market participants, however, could interpret any signal that deflation is no longer a pressing concern as a sign that policymakers could soon start to withdraw their support.

Lou Crandall, chief economist at Wrightson ICAP, said it would be more significant if the Fed left the inflation language as is.

"If they're not willing to change the language, they're working even harder to make people think they're not in a hurry to pull back from supporting the economy," he said. "It would show they're interpreting any positive signs very cautiously," which would most likely help the U.S. government bond market to gain more.


Accounting tweak could save Fed from losses

January 21, 2011

Lou Crandall, chief economist at research firm Wrightson ICAP, points out that the nearly $1 trillion in dollars circulating through the global financial system represent a form of interest-free borrowing for the Fed, giving it a large cushion against possible losses.

The Economist

$14.3 trillion and counting

January 15, 2011

The Treasury can still borrow an extra $327 billion and draw down some $200 billion in deposits at the Federal Reserve before it breaches the current ceiling of $14.3 trillion. Geithner says that will happen between March 31 and May 16. He can then get additional breathing space by means of various gimmicks, such as redeeming debt issued to civil service pension plans. Lou Crandall of Wrightson ICAP, a research firm, calculates that the Treasury could free as much as $223 billion that way, and another $278 billion by selling mortgage-backed securities and privately originated student loans it acquired during the crisis. These steps, he says, could tide the government over until the autumn.

The New York Times

Bonds by the Billions

January 11, 2011

Louis V. Crandall, the chief economist at the research firm Wrightson ICAP, said Wall Street bond traders were driving hard bargains. The Fed has tipped its hand by laying out which Treasuries it intends to buy and when, giving the bond houses an edge.

''A buyer of $100 billion a month is always going to be paying top prices,'' Mr. Crandall said of the Fed. ''You can't be a known buyer of $100 billion a month and get a good price.''


Unemployment Drops for Real

January 10, 2011

The drop in the jobless rate to 9.4% from 9.8% was treated as an aberration by some. But as Wrightson ICAP chief economist Louis Crandall points out, November's 9.8% looks more like the aberrant figure. "In the absence of the misleading November signal," comments Crandall, "this morning's 9.4% reading would not look terribly surprising to anyone."

The Wall Street Journal Europe

U.S. news: Economists see faster growth

December 13, 2010

Of the 55 economists polled, most of whom are based in the U.S., just seven said the euro zone doesn't need to take more steps to stem the debt crisis on its periphery. Twelve respondents said the bloc should boost its bailout funds, while eight suggested much higher bond purchases by the European Central Bank. Seven economists think the euro zone should issue collective bonds, while six want to see a debt restructuring of the most troubled nations.

"Any choice needs to be accompanied by difficult governance reforms," said Lou Crandall of Wrightson ICAP.

Associated Press

Bernanke ramps up defense of Fed's Treasury bond purchases by pointing to weak economy

December 6, 2010

Lou Crandall, chief economist at Wrightson ICAP, said Bernanke is right that the Fed's purchases won't significantly change the amount of money circulating in the economy. That's mainly because banks aren't lending most of the money they already hold in reserve. When the Fed buys Treasurys, it increases the reserves in the banking system. For those reserves to actually "create" money, the banks would have to lend it.

Still, Crandall suggested that the bond-buying program creates the appearance of printing money, something that could put the central bank's credibility at stake.

Reuters News

Fed policy pushes Treasury lovers to bond elsewhere

November 18, 2010

"The Fed's stated goal is to displace current investors in Treasuries," said Lou Crandall, chief economist at Wrightson ICAP in New York. "At the longer end of the note sector they're certainly redirecting investors elsewhere."

The Wall Street Journal

The Global Economy: Fed Treads Into a Once-Taboo Realm

November 5, 2010

Between now and June, the Fed will be purchasing $110 billion of Treasury notes and bonds a month, $75 billion a month in its new program and $35 billion a month to replace mortgage bonds in its portfolio that are maturing. In the same period, the Treasury will be issuing about $114 billion of new debt each month, estimates Louis Crandall, an analyst at Wrightson ICAP LLC.

The Star-Ledger

Fed to buy $600B in bonds to boost economy

November 4, 2010

Lou Crandall, chief economist at Wrightson ICAP, said the Fed's credibility is at stake. He worries that the Fed's program creates an appearance of buying government bonds and printing money to pay for the bloated federal budget deficits.

"This runs the risk of hurting the Fed's reputation," Crandall said. "This may come back to haunt the Fed."

Reuters News

New Wall St hot topic: Fed's interest on reserves

October 26, 2010

Some economists argue that if the Fed were to reduce or eliminate interest payments on reserves, banks would put their money to work in other ways, such as new loans or real assets. They say such moves would be a more effective way to stimulate economic growth -- the ultimate goal of quantitative easing -- than Treasury purchases.

"Academic economists tend to like it because they think this will somehow flush out the $1 trillion in excess reserves," said Lou Crandall, chief economist at Wrightson ICAP in New York.

But he said he did not think the move was likely in the current environment, in which the U.S. economic recovery looks sluggish but not entirely stalled.

"If we appear to be falling into a double dip, that would be one of the five things the Fed would do as part of the next 'kitchen sink' strategy," Crandall said.

The Wall Street Journal

U.S. News: Bernanke Argues for More Fed Action

October 16, 2010

But Louis Crandall, an analyst with Wrightson ICAP LLC, a money-market broker, said that in the process of building a case for more action and talking so much about the dimming economic outlook, the Fed had "destroyed business confidence."


Fed mulls trillion-dollar policy question

September 20, 2010

"My own view is that any radical balance sheet program would be seen by many as an act of desperation which would dampen business sentiment and depress non-financial borrowing even more," said Wrightson ICAP Chief Economist Lou Crandall.


Housing data not expected to sparkle

September 17, 2010

There may be some increases in the sales data for new and existing homes "but no one is going to take them as a sign of new momentum," said Lou Crandall, chief economist at Wrightson ICAP.

Bloomberg News

Jobs report eases recession worries

September 4, 2010

"There is less reason to be concerned about the trajectory of the economy in the very near term, but labor market trends remain weaker than the Fed is willing to tolerate in the long run," said Louis Crandall, chief economist at Wrightson ICAP in Jersey City, N.J. "Continued stagnation will exhaust the Fed's patience at some point."

Dow Jones Capital Markets Report

US Pending Home Sales Up; Jobless Claims Mixed

September 2, 2010

Lou Crandall, the chief economist for Wrightson ICAP, called the productivity figures a "glass half-full, glass half-empty story."

"It shows that labor demand is stronger than the payroll data for the second quarter, but at the same time it reflects a behavioral pattern on the part of employers that does not suggest they are entirely convinced that trends have improved," he said.


Factory output grows 1% in July

August 18, 2010

"This is encouraging," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, who forecast the jump in output. "This is a welcome interruption in the softening trend of economic data. Factory output is still growing solidly."

Dow Jones International News

Fed Should Not Cave In To Market Pressure

August 9, 2010

"The day one story would be, 'Fed Moves to Stimulate Economy.' The day two story would be, 'Fed is Impotent,'" said Lou Crandall, chief economist at Wrightson ICAP and a veteran Fed watcher.

Yet the irony is that meaningless gestures like the mortgage reinvestment plan do themselves look political. "Empty symbolism is something that desperate politicians seeking re-election do," said Crandall.

International Herald Tribune

In emulating U.S. test, Europe drops a step

July 22, 2010

Initially, there was a sense that those tests were not rigorous enough, said Louis V. Crandall, chief economist of Wrightson ICAP, a research firm. ''The obvious question that seemed to arise going into it was, either you know the answers before you start the exercise, or you wouldn't do it,'' he said.

Bank stocks continued their gains through the rest of 2009. ''In the end, it was really the assurance from regulators that they had looked through the books and done enough scenario testing so that there weren't any surprises,'' Mr. Crandall said.

American Banker

Bank Tax Set To Return at Higher Price

July 19, 2010

Although House and Senate conferees stripped a proposed bank tax from the regulatory reform bill at the last minute, the fight over the issue is far from over - and the price tag may end up much higher for large institutions.

Exactly how the fee will be assessed also remains unclear. The administration has not yet sent legislative language and remains vague about the structure of the tax.

"You can debate in theory how best to structure this thing to have fewest distortionary effects, but you end up having to create an entirely new revenue structure for what is ultimately a small amount of revenue each year," said Lou Crandall, chief economist for Wrightson ICAP.

Another consideration is international coordination. Treasury Secretary Tim Geithner and Obama have been trying to sell other countries on a tax of their own, and while some are indicating they are moving toward consensus, there isn't agreement yet.

"The issue is caught up in the G-20 discussion process," Crandall said. "There's been no consensus there, with some nations still favoring a bank tax and others very much opposed."

The Wall Street Journal

Treasurys Are Still Hot, Despite Puny Yields

July 12, 2010

Economists don't see any large changes to consumer and producer price indexes, keeping inflation -- the main risk to the fixed returns on longer-dated bonds -- muted. Retail sales, jobless claims, and a series of manufacturing data should all point to a long haul ahead in the recovery. "We're not going to get many numbers that will challenge forecasts of low economic activity," said Lou Crandall, chief economist at Wrightson ICAP.


Caution's the word as Fed wraps up meeting; No major change expected in central bank's message on U.S. economy and rates

June 23, 2010

The backdrop since the FOMC's last meeting in April has been eventful, dominated by turbulence in the financial markets arising from the European debt crisis. At the same time, key U.S. economic data -- including unemployment and retail sales -- have been decidedly soft.

As a result, there will be "a few more cautionary notes" in the Fed's statement, said Lou Crandall, chief economist at Wrightson ICAP.

Many analysts expect the Fed's policy statement to be more dovish. Fed officials will likely to discuss how they might react to a double-dip recession.

"The Fed probably feels that the challenge ahead of it is to find ways to strengthen its support for financial markets if the need should arise," said Wrightson ICAP's Crandall.


New Obama security strategy hardens economic resolve

June 4, 2010

"The discussion of the need to make hard choices in general ... and promising to give citizens all the facts so that they could judge the costs of ongoing military operations, sounds like the administration is stockpiling talking points for cutbacks in the security budget," said Lou Crandall, chief economist at financial research firm Wrightson ICAP in Jersey City, New Jersey.

Dow Jones Business News

US Fed Total Discount Window Borrowings Wednesday $71.04 Billion

June 3, 2010

Lou Crandall, chief economist with Wrightson ICAP, said only a few commercial banks had still been borrowing from the Fed's discount window in recent weeks, and they have market alternatives. So the steep drop probably marks the "closing of a chapter that had run on too long anyway," he said.


Fed to start small auctions of term-deposits; Tool to soak up excess bank reserves

May 28, 2010

Lou Crandall, chief economist at Wrightson ICAP, said the Fed's pilot program sheds no light on the date that the Fed will start hiking interest rates.

"It is a pre-condition [to eventual tightening], but not something that indicates a schedule is unfolding in any way," Crandall said.

Crandall estimated that the Fed will have to lock up "hundreds of billions of dollars" of excess reserves to have confidence that their policy tools will work. It was not clear whether this would be mean a low $100 billion or somewhere in the $300 billion range, he said.

The Modesto Bee

Europe May See Credit Crunch

May 23, 2010

Q: [Aren't overly indebted European economies] reminiscent of the turbulent fall of 2008?

"It's just a general heightened caution in extending short-term credit," said Lou Crandall, chief economist for money market researcher Wrightson ICAP, pointing to similarities with fall 2008 on Wall Street. "One of the problems that you have (is that) financial markets rest heavily on trust. And one of the problems you have after any financial crisis is the market's immune system has been weakened because people are reminded of what can happen."

Dow Jones Capital Markets Report

Lack Of Demand For Fed Currency Swaps Plus For Markets

May 21, 2010

The lack of interest in the currency swap lines "suggests people are looking at overseas dollar auctions in purely commercial terms" and they are going where the funding is cheapest, which right now is in the private sector, said Lou Crandall, chief economist with Wrightson ICAP. "There are alternatives" to using the Fed's currency swap lines, and what's been seen so far is "encouraging," he said.

Both Crandall and the Stone & McCarthy analysts agree the existence of the swap lines are a good thing for market psychology, letting investors know dollars will be available to the international finance system if they are truly needed.

International Herald Tribune

E.U. bailout fails to ease market fears; Despite bailout by E.U., fears are renewed about exposure of big banks

May 18, 2010

So far, the proposed rescue package has failed to ease worries at these funds, which have cut back on loans to European banks and are demanding higher rates and quicker repayment.

''More people are making the yes or no decision to pull out of the market and keep their money closer to home,'' said Lou Crandall, the chief economist of Wrightson ICAP, a money market research firm.

CQ Weekly

Fiduciary Duty: It's Complicated

May 15, 2010

"I can't imagine what a workable fiduciary duty would mean," says Louis Crandall, chief economist at the New Jersey-based research firm Wrightson ICAP, noting that if a brokerage has a legally binding duty to make deals that benefit its customers, it cannot act as a market maker. "It's extremely difficult to write those rules for market makers."


Fed not likely to sell mortgages holding soon, analysts say; Minority keen to start sales, but majority seen as reluctant

May 12, 2010

There is a vocal minority on the Fed keen to start MBS sales soon, said Lou Crandall, chief economist at Wrightson ICAP. However, "most FOMC members think that is a boat they would rather not rock," Crandall said.

"There is no doubt they will sell mortgages at some point, but not at an early date," Crandall said.

There is also an outside chance that the Fed would have to purchase more MBS or other assets if the economy turns down again. "We'd be talking about a new phase of the crisis," Crandall said.

The Fed now returns its profit to the Treasury. This year it returned $47.4 billion, a new record. Such heady profits are unlikely to be repeated, Crandall of Wrightson ICAP said.

The San Francisco Chronicle

How U.S. will figure in rescue plan for Europe

May 11, 2010

The Fed is assisting in this effort by reopening its temporary U.S. dollar liquidity swap facility with the European Central Bank and the central banks of Canada, England, Japan and Switzerland.

Swap lines "are very much in the United States' national interest," says Lou Crandall, chief economist of Wrightson ICAP.

"What happened after Lehman, and started happening last week, was that these international banks that wanted to participate in the U.S. market were having trouble funding their dollar operations," Crandall says. "If foreign banks have trouble funding their dollar positions, they will retreat from lending, creating credit constraints in the U.S."

Dow Jones News Service

Fed Watch: A Look At Europe And Fed's Central Bank Swap Program

May 7, 2010

Strains in short-term funding markets are starting to show up again, but they're nowhere near as severe as they were after Lehman Brothers collapsed in September 2008, so it's not clear that the program is warranted.

"There is definitely stress," says Louis Crandall, a money-market analyst at Wrightson ICAP LLC, a money market broker. He adds that some borrowers in money markets are being to take shorter-term loans from lenders because of fears among lenders about being exposed for too long.

Still, Crandall notes, the stress in money markets isn't nearly as severe as it was during the worst of the financial crisis. Back then, he notes, Libor rates were well over 3 percentage points above the expected fed funds rate, compared to less than a quarter of a percentage point today. The wide spread back then was a sign of extreme wariness in short-term money markets about lending even for short periods.

Crandall said a Fed swap program would only be useful if it was instated as part of a broader European package to calm financial market worries.

The Financial Daily

Pakistan: US Treasury issuance cuts ahead as economy improves

May 2, 2010

"Auction sizes are still going to remain very high, but it does appear the Treasury can soon start scaling back some or all of its note and bond offerings," said Lou Crandall, chief economist at Wrightson ICAP in New York.

The Wall Street Journal Asia

World News: Obama nominates 3 for Fed --- Lawyer and 2 economists would reinforce board's activist bent

April 30, 2010

Others doubt the appointments will make much difference given the chairman's dominance. The president "is looking to add people to the board who take regulation seriously. . .consistent with his push for entrenching the institution at the heart of the regulatory system," said Lou Crandall, a money-market economist at Wrightson ICAP.


Things may be looking up but Fed is standing pat

April 26, 2010

Lou Crandall, economist at Wrightson ICAP, said Bernanke does not have an itchy trigger finger.

"The Fed is not going to let itself get bullied into tightening prematurely if it feels the economy will benefit" from low rates, Crandall said.

The Wall Street Journal

Debt 'Masking' Under Fire; SEC Considers New Rules to Deter Banks From Dressing Up Books; Ghost of Lehman

April 21, 2010

"The fact that window-dressing produces distorted financial data (both for individual firms and for the system as a whole) is unhealthy," wrote Lou Crandall, chief economist at the research firm Wrightson ICAP LLC, in a note reviewing the Fed data last week.

The Wall Street Journal

More 10-Year TIPS Sales Likely In 2nd Half 2010

April 20, 2010

"Since TIPS are a retail-oriented product, some have argued that the Treasury may be better served by a steady progression of smaller offerings," said Louis Crandall, chief economist at Wrightson ICAP LLC.

Euclid Infotech

United States : NY Fed to entice market funds into reverse repos

April 8, 2010

"It would be extremely helpful in attracting participation and limiting the impact of the operations on broader money market conditions," said Lou Crandall, chief economist at Wrightson ICAP in New York.

Money funds need liquidity options," Crandall added. "Money funds have always needed a liquidity option, but that need has become even more acute with the stringent liquidity rules imposed by the SEC this year."

Euclid Infotech

United States : Fed Ends Bank Exemption Aimed at Boosting Mortgage Liquidity

March 22, 2010

The goal was to stop the hemorrhaging of risk capital, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Investors were being forced out of the securities market because they couldn t fund their positions, even in higher-quality assets in some cases.

The Wall Street Journal

Treasury's Debt-Issuance Man to Go, $8 Trillion Later

March 19, 2010

"The goal of the debt managers at Treasury is always to be as close to invisible as possible," says Lou Crandall, chief economist at Wrightson ICAP.

The New York Times

U.S. interest rate increase may signal end to period of high bank profits

February 28, 2010

News on Thursday that the Fed would raise the interest rate that it charges banks for temporary loans was seen by lenders as a sign that their long, profitable period of ultralow rates was coming to an end.

Others countered that the move at least brought forward the moment when interest rates would begin to rise again - and put an end to the banks' period of easy money.

Louis V. Crandall, chief economist at Wrightson ICAP, said it demonstrated "a willingness to entertain an early start to the real business of retreating from the Fed's very accommodating stance."

The Wall Street Journal

U.S. News: Fed to Get $200 Billion Boost --- Money From Treasury Will Make It Easier to Raise Interest Rates Down the Line

February 24, 2010

The Treasury initiated the program -- the Supplemental Financing Program -- during the peak of the financial crisis in 2008 to get cash to the Fed to fund programs that pumped credit into the financial system. The Treasury reduced the program last year as its own borrowing authority approached legal limits. Now that Congress has raised the government debt limit, Treasury was able to revive it.

"The intention always was to resume [the program] when the debt ceiling was increased on a permanent basis, which finally happened earlier this month," said Lou Crandall, a money-market analyst at Wrightson ICAP LLC.


Fed looks impatient in wake of discount rate hike; Could 'extended period' wording be on chopping block in March?

February 19, 2010

Crandall said it looks like the Fed's key pledge to keep interest rates near zero for an "extended period" may be on the chopping block at the next Federal Open Market Committee meeting on March 16.

"Barring severe disappointment in the economic data over the next month, or more serious financial turmoil in Europe, the odds seem good that the FOMC will soften its 'extended period' language at the next meeting," Crandall, the chief economist at Wrightson ICAP, said in a note to clients.

Dow Jones Newswires

Treasury Prices Rise Slightly Before Jobs Data, Supply Details

February 2,2010

"These increases would be the final installment of the drastic expansion of Treasury coupon issuance that began in late 2007," said Louis Crandall, chief economist at Wrightson ICAP LLC in Jersey City, N.J.

Many market participants said the record pace of U.S. Treasury debt sales could be nearing a peak, which may allay concerns about the ability of the U.S. to continue its massive borrowing efforts at low rates and could have broader implications on the financial markets and the economy.

The Wall Street Journal

Backers Rally to Bernanke --- White House Pushes to Secure Confirmation Votes; Central Banker Bruised

January 25, 2010

The debate over a second term for the 56-year-old Mr. Bernanke is eclipsing party affiliations in the Senate, drawing liberals and conservatives into unusual alliances. It has also reinforced the Fed's weakened standing with the public and Congress, and the threat to its long-cherished posture as independent from elected politicians.

All the dissonance has rattled Wall Street. "Financial markets usually react poorly when politicians start to bash the Fed," said Lou Crandall, chief economist at Wrightson-ICAP, a research firm. "The fear is that political pressure might prevent the Fed from pursuing a disciplined monetary policy, leading to greater inflation risks in the future."

Dow Jones Business News

Fed's goal this week is to make sure 'all is calm'; No significant policy changes expected after two-day meeting ends Wednesday

January 6, 2010

One economist who closely follows monetary policy -- Louis Crandall of brokerage Wrightson ICAP - says the minutes may reveal policy makers are considering selling some of the mortgage-related securities the Fed bought to ease last year's credit crisis. Such sales would add to bond supply, weighing on prices.

"We think the risk in this afternoon's minutes is that they might suggest that the FOMC could be open to the idea of starting to sell off parts of the MBS portfolio as conditions stabilize," wrote Crandall.

Dow Jones Capital Markets Report

Fed Move May Signal End to Easy Bank Profits

December 30, 2009

Analysts who watch the Federal Reserve closely say investors should in the first part of 2010 focus more on its tools to soak up money from banks instead of the central bank's benchmark interest rate.

Lou Crandall, economist with Wrightson ICAP, believes there will be a gap of at least one monthly Fed meeting between when the central bank drains reserves and when it hikes rates.

The New York Times

To Inhibit Inflation, Fed Offers to Set Up Interest-Bearing Deposits

December 29, 2009

Lou Crandall, chief economist at Wrightson ICAP, said term deposits could emerge as a popular investment vehicle in the long term, though the immediate effect would most likely be subdued.

''Banks would rather show the Fed as a counterparty than another bank,'' Mr. Crandall said. ''It just looks better in an era when memories of credit problems are quite fresh. And now they earn interest, too.''

Reuters News

US commercial paper outstanding rises in week -Fed

December 24, 2009

The reemergence of growth could be a positive sign for a slow economic recovery, but Lou Crandall, chief economist for Wrightson ICAP in Jersey City, New Jersey, discounted the significance of the latest seasonally adjusted data.

"This week's slight expansion tells us that the level of (commercial paper) outstanding has leveled out," Crandall said. "And that means businesses are still in a holding pattern."


Fed's goal this week is to make sure 'all is calm'; No significant policy changes expected after two-day meeting ends Wednesday

December 14, 2009

Lou Crandall, chief economist at Wrightson ICAP, said the stronger growth in the fourth quarter was based on too many technical factors to shift the Fed's thinking.

"The economy's trajectory in the first quarter remains uncertain," Crandall wrote in a note to clients.

The Wall Street Journal

Most Economists Urge Action on Jobs

December 10, 2009

"Better regulation is necessary, but many legislators appear more interested in retribution than in future stability," said Lou Crandall at Wrightson ICAP.


Fed under pressure but rate audits unlikely

November 27, 2009

Fed officials believe lawmakers do not understand how much the Fed is already audited by Congress or how much of a negative impact monetary policy audits would have, and they are likely to continue to lobby strongly against the proposal.

"What the Fed wants to avoid is having the current public anger institutionalized," said Lou Crandall, chief economist for Wrightson ICAP in Jersey City, New Jersey.

Plus News Pakistan

Iran: Fed officials watch asset prices for signs of 'excessive risk'

November 26, 2009

Fed policy makers at their meeting this month repeated their commitment to keep the benchmark interest rate "exceptionally low" for an "extended period." In their discussion of asset prices, they said the likelihood of excessive risk-taking was "relatively low."

Even so, officials "introduced topics that they traditionally avoid," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Asset values "can be considered some of the additional factors that would influence their outlook for inflation and growth."

The Wall Street Journal

Economists See Fed Raising Rates Near Midterm Elections

November 12, 2009

"The small-business sector is still under pressure, and larger companies are still focused on bolstering current results rather than preparing for the future," said Lou Crandall at Wrightson ICAP. Productivity gains and cost cuts have allowed companies to boost their bottom line without adding staff.

The Saigon Daily Times

Senate financial reform plan would slash Fed role

November 12, 2009

Lou Crandall, economist at Wrightson ICAP in Jersey City, New Jersey, said Dodd's plan marks a compromise for the Fed as it stops short of proposing that regional Fed presidents -- who can vote on monetary policy -- should be appointed by the White House, as some lawmakers have suggested.

The Fed bank presidents are named by their regional boards, with the consent of the Board of Governors.

"Congress needs to find some way around the conflict of interests involved in having local commercial bank representatives control the hiring of Fed presidents, Crandall said. "This seems like a Fed-friendly compromise."


Fed's new dashboard signals no rate hike soon

November 5, 2009

"In the context of the statement, the conditional markers remind the market that the focus is on the level, not the direction, of economic data," said Lou Crandall, an economist at Wall Street research firm Wrightson ICAP.

Institutional Investor Magazine

Federal Reserve Exit Strategy Urged

November 3, 2009

The communications muddle, however, may have one potential benefit. "The uncertainty, albeit probably more by default than design, about the Fed's exit strategy and timing and scale of rate hikes may be helping the Fed at the margin to dampen the buildup in leveraged asset plays that could otherwise lead to asset bubbles over the coming quarters while it continues to provide accommodative interest rates for nonfinancial borrowers," notes Lou Crandall, chief economist at research shop ICAP-Wrightson.

CQ Weekly

Federal Borrowing on Borrowed Time

November 1, 2009

Because investors may be slow to react to a change in fiscal policy, Congress should begin to tackle its deficit spending "even before long-term interest rates reach really punitive levels," said Louis Crandall, the chief economist for Wrightson ICAP, a research firm. "The accumulated debt might be truly massive by the time we got a significant interest-rate response."

Vancouver Province

Deserted mall symbol of Fed bailout; bear stearns asset: Shopping complex owned by government went into foreclosure

November 1, 2009

"What the Fed and banks have said they are worried about is a new wave of losses on commercial real estate and here is an example of an early adopter in the Fed's portfolio,'' said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, N.J.

"The fact that the thing was written so that the Fed does not have the oil rights is just classic. Not that that is the Fed's fault,'' he said.

The Wall Street Journal

Treasury Sales Smash Record --- Eager Investors Buy $123 Billion in Notes for the Week

October 30, 2009

And the U.S. will need that demand going forward. Lou Crandall, chief economist at Wrightson ICAP, expects the Treasury to issue $1.325 trillion in new debt in the year through September 2010, based on the government's guidance for a budget deficit of $1.3 trillion.

Plus News Pakistan

Qatar: Debt takes centre-stage in battle to forge policy

October 26, 2009

Lou Crandall, an economist at Wrightson Icap, said investor valuation models further anchor rates. Still, some worry Treasury yields could back up when the Federal Reserve stops buying securities and/or signals it is close to raising rates.

The Economist

Tomorrow's Burden

October 24, 2009

"Other countries can afford a failed auction; we can't," says Lou Crandall, chief economist at Wrightson ICAP, a financial-research firm. "What do you do when there is a confidence shock to your flight-to-safety asset?"

But it is difficult to identify any such concerns today. If anything, the underlying demand for Treasury bonds is rising. Mr Crandall notes that in the past year the share of Treasury debt bought at auctions by big investors and foreign central banks (as opposed to dealers) has roughly doubled to around 60%.

Dow Jones Newswires

Commercial Paper Market Data Under Scrutiny

October 21, 2009

"The large increases are just a figment of the seasonal adjustment's imagination," said Lou Crandall, chief economist at Wrightson ICAP, noting that with the major financial shocks of the past two years, the seasonally adjusted numbers treat these events as the new normal where that may not necessarily be the case.

Traditionally, he said, the data were used by two audiences: by traders, who prefer to see the raw data so they know how much paper is available for trade and by others who generally see the seasonally adjusted numbers as an indicator of credit availability and the broader economy.

"Right now, even for that audience, the seasonally adjusted numbers are not a good indicator," Crandall said.

Investment Dealers Digest

Quoted; Notable, quotable, heard around town

October 9, 2009

"The PPIP will not make a major dent in the stock of impaired assets, so it's not going to have a major structural impact."

American Banker

PPIP Finally Ready, But Is It Needed?

October 7, 2009

"The PPIP will not make a major dent in the stock of impaired assets, so it's not going to have a major structural impact," said Lou Crandall, chief economist for Wrightson ICAP. "The more buyers, the better...but this is not a major wave of purchases."

Plus News Pakistan

US Fed turns to mutual funds to stave off inflation

September 25, 2009

Fed officials believe that there may be appetite among money funds to lend the money, since these funds are under pressure from investors and regulators to stick to risk-free and highly liquid business. Lou Crandall, economist at Wrightson Icap, said: "The use of money market funds is a great transitional tool, as many of them adapt to a new environment of liquidity management requirements."


Cenbank cash retreat doesn't herald hikes

September 24, 2009

"The process of winding down the TAF began in the summer and they are now moving more slowly than they have been," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.

"... and it also tells you that they do not want the market to think that they are getting close to tightening," Crandall added.

The Wall Street Journal

Decision on Ending Housing Prop Can Wait

September 23, 2009

Meanwhile, banks will be reluctant to buy mortgage-backed securities until they know the market can function without Fed support, says Lou Crandall, chief economist at Wrightson ICAP.

Given the risks, the Fed might be better off saving the decision for November, suggests Mr. Crandall. It might have a better feel for the housing market's intrinsic strength by then.


When and how will Fed make its moves? Fed watchers are all over the place on these key questions

September 23, 2009

The Fed is likely to use reverse-purchase agreements and time deposits to get excess reserves out of the market.

Lou Crandall, chief economist at Wrightson ICAP said the reverse-purchase plans are already being tested and could be announced sooner rather than later.

Financial Post

Fed seeks to pull cash injections, sources say; Reverse purchase agreements with bond dealers

September 23, 2009

"One thing the Fed has to figure out is if they can launch pilot programs without spooking the market and creating the perception that they are about to tighten," said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, N.J.-based research firm that specializes in government finance.


Fed may road test exit strategy tools

September 22, 2009

Wrightson ICAP, however, estimated that the increase in reserves will only push the average effective federal funds rate slightly below 0.15 percent in the fourth quarter -- still well within the Fed's target range of zero to 0.25 percent.

Fed officials will likely want to avoid appearing as if they are targeting a reserve level, Wrightson ICAP chief economist Lou Crandall said.

"When they get around to introducing these tools, the challenge for them is to find a way to persuade the market that this is not a prelude to a tightening and using the SFP as cover might be appealing," he said.

"The problem is that acting on this now implies they have a target for excess reserves and that is a framework that most Fed officials have not embraced," Crandall added.


All quiet on the rate front; With market focus on timing of tightening, Fed wants low profile

September 21, 2009

"The next month or two are a sensitive time for the housing market," Crandall said. The homebuyer tax credit is set to expire at the end of November and many wonder whether the market could maintain momentum without it.

"We strongly doubt that the Fed will hit the market with news that it plans to scale back its support for the mortgage market at the same time. We think the Fed will prefer to wait until the Nov. 4 meeting to assess the state of the housing market before committing itself to a specific strategy for winding down its MBS purchases," Crandall said.


Potential Fed exit strategy tools

September 16, 2009

"This [term deposit facility] would have almost exactly the same effect as doing term reverses, except that the instrument being offered by the Fed would be structured as a deposit rather than a secured loan. That would eliminate a lot of operational headaches, as the Fed would not have to allocate collateral to each of its individual counterparties," Wrightson ICAP economist Lou Crandall said in a note to clients.

The Wall Street Journal

U.S. Treasury girds for debt-ceiling fight --- Geithner seeks to lift borrowing limit; Congress's decision

September 14, 2009

"In this environment, both [political parties] know that they can't have a serious question of whether Treasury would miss a debt-service payment," said Lou Crandall, a senior economist with Wrightson ICAP, a Wall Street fixed-income research firm.

The Wall Street Journal

Bailouts Yield Returns Amid Risk

September 1, 2009

"The money-market mutual-fund industry would have loved to have earned one [percent] and change on its two trillion in assets," said Lou Crandall, economist with Wrightson ICAP, a Wall Street fixed-income research firm.

Still, the government is making trade-offs between risk and return. The Fed's purchases of mortgage-backed securities are one example. Mr. Crandall estimates the Fed will rake in $50 billion a year on its portfolio of mortgage securities by next year. Right now, the Fed can fund that with extremely cheap money -- it borrows from banks for next to zero.

The Wall Street Journal

Banks on Sick List Top 400 --- Industry's Health Slides as Bad Loans Pile Up; Deposit-Insurance Fund Shrinks

August 28, 2009

"That slows job creation and affects corporate spending" and could prove a hindrance to an economic recovery, said Lou Crandall, chief economist at research firm Wrightson ICAP.

The Daily Telegraph

Bernanke poised for second term at Fed

August 26, 2009

Senate banking committee chairman Chris Dodd, who will chair the hearings, said that while he had "serious differences'' with the Fed in recent years, Mr Bernanke was "probably the right choice''.

Most economists agreed, with Wrightson ICAP's Lou Crandall saying the experience Mr Bernanke gained over the past two years "will be invaluable''.

The Wall Street Journal

Ahead of the Tape

June 25, 2009

Every quarter end, banks file a one-day public snapshot of their balance sheets with the Securities and Exchange Commission.

In anticipation, many banks scramble to dress up their balance sheets, shedding unloved assets and declining credit to risky borrowers.

The full-on sales efforts can trigger dislocations in capital markets, says Lou Crandall, chief economist of Wrightson ICAP.


Fed to stress rate hikes aren't coming anytime soon; Trickier question is what Fed says about credit-easing policy

June 24, 2009

"We expect the FOMC to tweak this afternoon's policy statement to make clear that it has no intention of tightening in the near term," wrote Lou Crandall, chief economist at Wrightson ICAP in a note to clients.


Fisher not surprised by rise in rates

June 9, 2009

Lou Crandall, chief economist at Wrightson ICAP, said Fed officials were likely to stress in coming days its statement that economic conditions warrant exceptionally low levels "for an extended period."

Over the past month, Fed officials have focused instead on convincing market participants that they have a workable exit strategy.

Now the Fed will look for ways to play up the "extended period" guidance, Crandall said.

The Wall Street Journal

The Week Ahead

June 8, 2009

Consumer spending represents about 70% of the demand in the economy. But new signs of recovery may come from businesses, said Lou Crandall, Wrightson's chief economist. One guide to the business mind-set will come on Tuesday, when Manpower, the temporary-help outfit, publishes its monthly employment-outlook survey. "Hiring plans may be less bleak than they were in the prior quarter," Mr. Crandall predicted.

The Wall Street Journal

U.S. News: Jittery Bond Market Threatens President's Agenda

May 30, 2009

Lou Crandall, chief economist at Wrightson ICAP, a Wall Street research firm that specializes in Treasury financing, said short-term spending is necessary, but added, "it would be great for the market to know there is an exit strategy."

Reuters News

Fed Focus- Rise in US Treasury yields may trigger more Fed buying

May 28, 2009

"Failing is worse than not trying ... you are setting yourself up for the 'impotent Fed' story," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City , New Jersey .

Dow Jones Capital Markets Report

Mark to Market: With Housing Starts, We are all Flying Blind

May 20, 2009

What we do know for sure is that the minutes will contain the Fed's "central tendency" projections for key economic indicators. Here is what Lou Crandall, chief economist at Wrightson ICAP, has to say about that: "The FOMC will almost certainly have a gloomier overall outlook than it did in the last official forecasts in January."

Dow Jones News Service

WSJ: Economists See Recession Ending By Autumn

May 14, 2009

"The best things about the stress tests was the timing of the release," said Lou Crandall of Wrightson ICAP. "The tests kept everything in limbo for a while, getting past the hurdle of recapitalization just as the data started to suggest the approach of a floor. That makes this a good time for the banking system to start the next phase of cleaning up the balance sheet.

The New York Times

Tests of Banks May Bring Hope More than Fear

May 4, 2009

''Everything has been in limbo, waiting for the stress tests to get out of the way,'' Louis Crandall, chief economist at Wrightson ICAP, a research firm. With the results, Mr. Crandall said, ''we'll start to get a sense for the extent to which the financial system can recapitalize itself.''

The New York Times

Worries Rise on the Size of U.S. Debt

May 4, 2009

Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product -- levels not seen since World War II, according to Wrightson ICAP, a research firm.


US jobs data a stress test of its own

May 4, 2009

"The employment report will likely be terrible again," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City , New Jersey .

He also noted that any eventual recovery in gross domestic product, which shrank an annualized 6.1 percent in the first quarter, will likely be meek.

Economists believe over 2 million additional jobs will disappear in coming months, even if there is a second-half rebound. That means that for the broader population, it will still feel like a recession.

"Merely getting growth above the number zero is not enough," said Crandall.


US aim to unveil individual bank stress test results

April 30, 2009

The pain for equity holders could be balanced by an overall stabilization in the banking sector if officials reiterate their promise to stand behind the 19 firms, said Lou Crandall, the chief economist at Wrightson ICAP.

"Clarifying exactly how the bank holding companies as a whole will be recapitalized can be a positive for debtholders and the system as a whole, while still being a negative for shareholders and holders of equity," Crandall said.


D.C. Current Loans, Liars and Geniuses

April 27, 2009

Lou Crandall, the chief economist at Wrightson ICAP in Jersey City, says we lack a proper baseline for measuring a thaw because no one previously was able to measure the activities of the rather large, shadow-banking industry, which is comprised of unregulated entities like SIVs and hedge funds, and entities that hold collateralized debt obligations, like AIG's now notorious financial-products division.

"It's hard to know how much of that former shadow has been replaced [by government fixes]. We also don't know how much of the shadow-banking world represented real financial activity and how much was just leverage," says Crandall, an expert on the banking system.


Fed to hold fire this week to take stock of actions

April 26, 2009

"The important point in the statement will be that unlike last time, they won't say the economy deteriorated faster than expected. Once they decided they had to make that admission, they apparently felt they needed some policy deliverable," said Lou Crandall, chief economist at Wrightson ICAP.

"But if this time they can say that things are turning out as expected, and they look forward to an upturn in the quarters ahead, albeit slow and grudging, then they don't need to add anything new to their operations roster," he said.


Brian Sack to lead New York Fed's markets group

April 17, 2009

"Brian knows as much about the Fed's balance sheet as anyone," said Lou Crandall, chief economist for Wrightson ICAP. "At the board he combined both theoretical research and practical implementation issues," he said.

Dow Jones Newswires

MARK TO MARKET: For Starts And Claims, It's Payback Time

April 16, 2009

As to the perhaps more important continuing-jobless-claims number, Lou Crandall, chief economist at Wrightson ICAP, has this to say: "Continuing claims have posted 12 consecutive increases averaging 101,000 per week and are likely to stretch that streak to 13 weeks this morning."

The Grand Rapids Press

What stress?; 'Tests' find banks in better shape than many expected

April 9, 2009

"Clearly, there is a desire to put a seal of good bookkeeping on these banks," said Lou Crandall, the chief economist at Wrightson ICAP.

"Whether they will use this to select a couple of sacrificial lambs is unclear," he said.

"It's a big uncertainty hanging over the system right now."

American Banker

Should Banks Be on Both Sides of Asset Program?

April 7, 2009

But Lou Crandall, chief economist for Wrightson ICAP LLC, agreed with Abernathy that bank participation may be beneficial.

"The advantage of having the banks in there buying is, as long as you are resolving the conflict of interest problem of having an entity investing in its own assets, banks have more expertise in valuing these kinds of assets than most other players," Crandall said. "One of the reasons they resist selling these assets at market prices is they firmly believe they are worth more."


Fed crosses rubicon and sets off firestorm; New plan to buy Treasury debt 'a step in the dark'

March 19, 2009

Lou Crandall, economist at Wrightson ICAP, said he doesn't think yields will stay low.

"Once the initial surprise wears off, the market tends to look past public-relations moves in most cases. Ultimately, we think the market is likely to focus on the fact that the net market supply of intermediate- and long-term Treasuries is still growing rapidly even after taking the Fed's buybacks into account," he said.

Dow Jones Newswires

MARK TO MARKET: Changing A Rule In The Middle Of The Game

March 3, 2009

Here's what Lou Crandall, chief economist at Wrightson ICAP has to say about the pending home sales report that will be released at 10 a.m. EST:

"The pending home sales index for January is likely to reverse most or all of the anomalous 6.3% increase in the previous month. This report...is likely to move back into line with other housing indicators, which have been much weaker on balance. We look for a 5% decline this morning, and a larger drop-off is possible. Given the erratic relationship between the pending sales index and other housing indicators in the past couple of monthly reporting cycles, the market is not likely to pay much attention to new surprises in this morning's report. The pending home sales index will have to re-establish its reputation as a predictor of the existing home sales index in order to be taken seriously."


Fisher backs Fed purchases of long-term securities

February 23, 2009

Some Fed-watchers are adamantly opposed to the idea of the central bank purchasing Treasurys.

"We believe this is one of the worst monetary policy ideas to surface in years," wrote Lou Crandall, chief economist at Wrightson ICAP.

"If the Fed commits itself to a policy of artificially depressing the returns on Treasury securities for an extended period, it will force investment committees around the world to reconsider their portfolio allocations to the U.S. Treasury market as an asset class," Crandall wrote recently. "There is no guarantee that the international investors who dominate the Treasury market will move into other dollar-denominated assets if the Fed manages to make Treasury securities unattractive to them.Given the Treasury's massive borrowing needs, any attempt to rig the market in this environment could backfire -- with serious long-term consequences for the public finances of the United States," Crandall said.


Money supply, in vogue again? Some forecasters say flood of money means economy is recovering

February 19, 2009

The increase in M2 "reflects the fact that money is being flushed out of the shadow banking system and moved into financial institutions that are perceived to have a safety net for large deposits or which have explicit guarantees on smaller deposits," said Lou Crandall, chief economist for money-market research specialist Wrightson ICAP. "It's not increasing the financial resources available for households for spending."

CQ Today

Financial Bailout Watchdog Says Treasury Overpaid for Banks' Assets

February 6, 2009

"The oversight group seems to be missing the whole point of the program," said Lou Crandall, chief economist at bond broker Wrightson ICAP.

"The Treasury sought TARP authority because it believed that the U.S. financial markets were at a critical juncture and needed that support," Crandall added. "The fact that a private investor would have demanded more is irrelevant. Or, rather, the fact that a private investor would have demanded more is the reason why the program was needed."

Dow Jones Newswires

FED WATCH: Dudley Pick Underscores Desire For Continuity

January 27, 2009

Lou Crandall, chief economist at Wrightson ICAP, said Dudley should bring a steady transition from Geithner. At the same time, in light of where he has been, it is possible Dudley could be more tied into the technical aspects of what the Fed's been doing, instead of the bigger picture of markets the New York Fed president frequently focuses on.

"Given how central desk operations are to what the [Federal Reserve] system is trying to accomplish, you wouldn't expect Dudley's role to change quite as much as Bill McDonough's did when he moved up" to the head of the bank, Crandall said.

American Banker

Fed, FDIC: Reconsider Tarp Asset Purchases

January 14, 2009

Regardless of how the government proceeds, Lou Crandall, the chief economist at Wrightson ICAP LLC, said the market may remain confused over the value of bank holdings.

"The mere fact you have prices on those transactions doesn't tell you very much about where prices would be in the absence of a public sector," he said. "Price discovery doesn't tell you anything if it's just artificial purchases by a government agency."

The Wichita Eagle

U.S. debt could rise by $2 trillion

January 4, 2009

While the current market for Treasurys is booming, it's unclear whether demand for debt can be sustained, said Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury financing trends.

"There's a time bomb in there somewhere," Crandall said, "but we don't know exactly where on the calendar it's planted."

American Banker

Treasury Unlikely To Ask Congress For Tarp Balance

December 22, 2008

Lou Crandall, the chief economist at Wrightson ICAP, agreed and said he did not view Mr. Paulson's remarks as a formal request.

"The message that Paulson sent was more of a warning than a formal request... . He's really acknowledging this is an issue for others to resolve - Obama and Congress - if they want to anticipate matters, but he's simply giving notice that, while they are not out of money, they are close enough so that the transition and Congress should be thinking about whether it's appropriate, whether to act before Inauguration Day if events require."

Augusta Chronicle

Taxpayers foot bill with, without bailout

December 11, 2008

There's sharp disagreement among outside experts about exactly what an auto industry failure would look like and how much it would cost taxpayers.

"It's possible to push arguments like this too far, but there is still a net cost" to government without taking action, said Lou Crandall, chief economist for the bond market research firm Wrightson ICAP in Jersey City, N.J. "The question is whether the social objective you're pursuing is worth that net cost."

The Daily Telegraph

Fed considers plan to issue debt to relieve pressure on banks

December 11, 2008

Fed officials are also understood to be concerned about holdings of Treasury bonds, which now stand at just less than $500bn, after the Treasury abandoned new issues of bills to finance the central bank last month in favour of issuing debt for its own growing needs. "The creation of excess reserves is the least desirable form of central bank balance-sheet expansion,'' said Lou Crandall , Wrightson ICAP's chief economist. A spokesman for the Federal Reserve refused to comment.

Dow Jones Business News

BOND REPORT: Treasurys Little Changed As Stimulus Plan Gains Steam

December 8, 2008

"The fiscal plans filtering out of the new Administration's transition team indicate that the Treasury's long-term borrowing requirement in calendar year 2009 will be, if anything, even larger than the Treasury feared at the time of the November refunding," Wrightson economist Lou Crandall said in a research report.

Turkish Daily News

Rescue an option for Citi

November 24, 2008

"That is the working relationship they have settled into with the Fed providing $1 trillion of the funding and the Treasury providing the equity tranche," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey .

Reuters News

MONEY MARKETS-Dollar Libor up again on TARP U-turn anxiety

November 14, 2008

Short-term interbank lending rates have risen over the past two days because "there has been a change of sentiment since the latest rewrite of the Treasury's asset rescue program," said Lou Crandall, chief economist at Wrightson ICAP, in Jersey City, New Jersey . "That has pushed out the timeline for the next major effort to clean up banks' balance sheets and created a little more uncertainty."


Treasurys are 'still the place to be'; Investors, particularly foreign buyers, snap up huge auctions, keeping yields low

November 13, 2008

However, data compiled by the Federal Reserve show that foreign official and private investors have increased holdings of Treasurys in the last two months, preferring them over debt issued by the big mortgage agencies. Holdings of Treasurys have increased, on average, about $20 billion a week for eight weeks, according to Wrightson ICAP.

"After four years of relatively soft demand from foreign official institutions, the Treasury is in the midst of a central-bank buying spree," Wrightson economist Lou Crandall wrote in a research note.

Lebanon Opportunities

Never Mind the Housing Market

November 1, 2008

Banks are being forced to take assets back onto their balance sheets and keep loans they once would have shed. "That's actually the crux of the problem," said Lou Crandall, chief economist of Wrightson ICAP, a Jersey City (N.J.) research firm.

St. Louis Post-Dispatch

Credit markets still not flowing

October 11, 2008

"There's a lot of activity that's all been jammed up into overnight lending," said Lou Crandall, chief economist at Wrightson ICAP. This is tolerable for banks because they have a safety net from regulators, he said, but non-bank institutions are at risk. That's because they have to resell their debt every night or couple of days, and if they're unable to do so on a given day, it could result in a big loss.

The Wall Street Journal

U.S. News: Economists Expect Crisis to Deepen

October 10, 2008

"For much of the year, policy makers warned about financial headwinds," said Lou Crandall of Wrightson ICAP. "If the credit mechanism deteriorates further, we'll hit a financial brick wall instead."


Fed rate cut could come this week -Wrightson ICAP

October 6, 2008

The Federal Reserve could cut interest rates by a half-point this week because the central bank may want to do so at the same time as announcing changes to reserve management after winning the power to pay interest on excess reserves, Wrightson ICAP said in a research note

Lou Crandall, chief economist at Wrightson ICAP and a well-known money market watcher on Wall Street, said that he expected the Fed to cut rates 50 basis points this month to 1.5 percent and that it may want to go ahead and pull the trigger this week. "If the Fed is ready to implement its new authority quickly, and if it expects to lower its funds target at some point this month anyway, it would probably combine the two in a single announcement," Crandall said.

Crandall noted that the effective fed funds rate has averaged 1.30 percent since Sept. 19, well below the 2 percent target because the Fed has flooded banks with a record amount of excess funds to help relieve the near frozen conditions in money markets.

"It would not make much sense to introduce new structural measures that would allow the Fed to jack the effective funds rate back up to 2 percent for a few weeks if the FOMC is going to cut the target to 1.5 percent anyway," Crandall said.

Crandall said the Fed may set the rate it pays on excess reserves at 50 basis points below the fed funds target.


TREASURIES-Surge in Asia as bank woes stir rate cut talk

October 5, 2008

Lou Crandall, chief economist at Wrightson ICAP, said the Fed's new powers to pay interest on excess reserves could lead to a change in reserve management this week that could be coupled with half-point rate cut to 1.50 percent.

"If the Fed is ready to put this long-sought authority to work quickly, we would expect it to combine the announcement of the new reserves framework this week with a half-point cut in its official funds rate target," Crandall said in his weekly Money Market Observer note.

"With economic and financial conditions pointing to a rate cut by the Oct. 29 FOMC meeting anyway, there is little point in introducing new tools to enforce the old target for the next three weeks," he said.

The Canadian Press

Investors run to Treasury bills, banks get stingier on lending

September 29, 2008

"The key point is, once you get those assets off the market, then for the first time you've got a fighting chance at starting the market in mortgage-related finance,'' said Lou Crandall, chief economist at Wrightson ICAP.

But while vulture funds big investors that specialize in buying high-risk assets for cheap are preparing to pounce, they are waiting to make sure the market does not have further to fall.

"As long as the Fed and Treasury are trying to keep things in a holding pattern,'' Crandall said, "potential buyers feel no sense of urgency.''

The Los Angeles Times

FINANCIAL CRISIS: DISSENSION ON CAPITOL HILL; It's a really bad sign when even banks can't secure a loan; Credit is so tight that routine transactions have been hobbled.

September 27, 2008

"If it keeps going and the authorities don't find a way to stop the contagion, it will hit the economy harder than anything we've had to absorb in decades," said Lou Crandall, chief economist at Wrightson ICAP, a research firm in Jersey City , N.J.

The Wall Street Journal

Demand for Short-Term Treasury Debt Puts a Crimp in World-Wide Supply

September 25, 2008

"It's not just the known unknowns," disrupting the market, said Lou Crandall, chief economist at Wrightson ICAP. "It's the unknown unknowns, of which there seem to be a lot."

The Wall Street Journal

Shock Forced Paulson's Hand --- A Black Wednesday on Credit Markets; 'Heaven Help Us All'

September 20, 2008

U.S. depositary institutions on average held excess reserves of $90 billion each day this week, estimates Lou Crandall, chief economist at Wrightson ICAP. This is cash the banks hold on the sidelines that does not earn any interest. That compares with an average of $2 billion, he says, noting he estimates banks held $190 billion in excess cash on Thursday, as they feared they'd have to meet many obligations at the same time.

Pittsburg Post-Gazette


September 18, 2008

"The Fed is very stretched, and that's why they've asked the Treasury to go ahead with these proposals," said Lou Crandall, chief economist at Wrightson ICAP and a longtime analyst of the Fed's market operations. "You don't want the market wondering whether the Fed has enough reserves to handle the next supplicant."


The Fed's Focus: Lending, Not Cutting; Bernanke and Co., seeing a rate cut as the wrong treatment for now, are stepping up as a lender of last resort to cash-hoarding banks -- and AIG as well

September 17, 2008

Federal funds are simply dollars that banks borrow from each other in overnight loans to bolster their reserves at the Fed. On Sept. 15 that rate swung all the way from a low of 0.01% to a high of 7%, according to the Federal Reserve Bank of New York . "The interbank market is dysfunctional right now," says Lou Crandall, chief economist of Wrightson ICAP, the New York research arm of London-based broker ICAP (IAP.L).


UPDATE 6-Fed funds down to 0.5 percent in late trade

September 15, 2008

The dip in federal funds late on Monday was widely expected due to the large size of the Fed repurchase agreements, said Lou Crandall, chief economist at Wrightson ICAP in Jersey City .

"The Fed this morning supplied vastly more reserves than the system will need at the end of the day. Unfortunately, for much of the day that was not enough to get funds trading," he said.

"The amount of reserves supplied was so far out of scale with end of day needs that the Fed knew that it was going to force the funds rate to crash at the end of the day," he said.

Dow Jones Newswires

Possible Govt Backstop For Lehman Buy Has Two Prior Models

September 11, 2008

The government might find a way to backstop Lehman Brothers , but the Fed may not step up to the same extent as it did with Bear Stearns and Fannie and Freddie.

"The first thing the Fed did was extend emergency credit in the Bear Stearns situation," said Lou Crandall, chief economist at Wrightson ICAP, a research firm. "This credit now exists in a prepackaged form, which dealers have access to without any of the emergency crisis trappings that went along with Bear Stearns loan."

The Times

US shares soar as unexpected figures paint better picture

August 29, 2008

Lou Crandall, chief economist for Wrightson ICAP, said: "The revised GDP figure is certainly not a bad thing but it is an imprecise estimate of the true health of the economy. GDP could turn negative in the second half."

The Wall Street Journal Asia

Fannie, Freddie bailout? --- Most economists in survey expect U.S. will step in with aid

August 15, 2008

However, nearly one in three said the companies should be nationalized now, and then split into smaller companies when the housing market recovers.

Just one economist -- Lou Crandall at Wrightson ICAP -- said the Treasury Department should invest equity in them now, without nationalizing them. "The explicit backstop might buy them enough time to earn their way back to good health," Mr. Crandall said.

Dow Jones Newswires

OFF THE RUN: NYFR Seen As Good Gauge, But Libor Still Rules

August 12, 2008

NYFR was never meant as a competitor to Libor. It was always seen as a complement to the British Bankers Association's dollar rate after the latter's reliability came under fire earlier this year amid worries that cash-strapped banks might be understating their funding costs.

NYFR's function "was to give people another idea of rates," said Lou Crandall of ICAP. "Libor is, and certainly will be, the benchmark for term markets. We thought though that it would be helpful to have another perspective on where market rates were." ICAP's main goal was to answer the question - what would rates set during U.S. hours look like, Crandall said. And thus far, "the answer is not very different from Libor itself."


Crisis Turns Free Marketeers into Regulators

August 8, 2008

Back in August 2007, Paulson took some ribbing for insisting that rising defaults on subprime loans, given primarily to borrowers with sketchy credit histories, were "contained" and posed little threat to the rest of the financial system, let alone the economy.

Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey, said there is a long-standing tradition of treasury secretaries "accentuating the positive."

"Nothing is served by excessive candor," he said. "The danger is that you end up looking completely out of touch."

The Times

American economy suffers first decline in six years;UK Business

August 1, 2008

However, economists gave warning yesterday that American business was nonetheless in a dire state. Lou Crandall, chief economist at Wrightson ICAP, the research firm, said: "The second-quarter figures may have been well up on the first quarter, but this is a clearing in the middle of the forest. The fact that this is all unfolding over a year or two, rather than two consecutive quarters, doesn't make it any less painful."


WaMu shares slip further as concerns linger; Thrift boosts liquidity above $50 billion; default protection gets pricier

July 25, 2008

Banks borrowed a daily average of $16.38 billion from the Federal Reserve's primary credit facility last week. That's a record under the current system, which was set up in 2003, according to Lou Crandall , chief economist at Wrightson ICAP.

This may suggest banks aren't willing to lend to each other as much as they used to do. Or it may mean that there's less of a stigma associated with borrowing directly from the Fed, Crandall explained.

"Banks are turning to the Fed as a regular funding source of funding, rather than just an overnight funding backstop," Crandall said.

American Banker

For I-Banks, Fed Really Is Last Resort

July 22, 2008

Lou Crandall, the chief economist at Wrightson ICAP LLC, agreed that the access should be extended and said lower borrowing would help boost confidence.

"It's more successful if it's not used," he said. "The traditional notion of a lender of last resort is that it gives the system confidence that it won't face a liquidity run. That was the reason it was the investment banks and not the commercial banks that suffered a run in March."


Overseas investors snapping up Fannie, Freddie debt; Fed custody data show buying in past two weeks

July 18, 2008

In the Fed's custody data, agency debt includes securities sold by the Federal Home Loan Banks and Ginnie Mae, a government-run home loan guarantor.

"The aggregate data provide no reason to suspect that foreign official institutions collectively are paring their holdings" of Fannie and Freddie debt, Lou Crandall, chief economist at Wrightson ICAP, wrote in a research note. "Some are reported to be re-examining their government-sponsored-enterprise portfolios, but others may be doing a little bottom-fishing."

The Wall Street Journal

Mortgage Market Turmoil: Fed Takes New Step In Critical Evolution

July 15, 2008

Structural changes in the credit markets also argue for an expanded role for the Fed. Loans that at one time would have stayed on banks' balance sheets are now sliced and packaged into securities by brokers that sell them to investors the world over.

If a large broker fails it could be just as damaging as a bank failure. But if the Fed needs to act as a backstop against such a catastrophic collapse, it also needs to exercise the same sort of regulatory oversight, said Lou Crandall, chief economist at Wrightson ICAP.


Fed doesn't want you to get a raise, Crandall says

July 10, 2008

In the past, the Fed has looked closely at core inflation (which excludes food and energy prices in order to see broader trends) to gauge whether higher energy prices are spilling over into a generalized inflation.

Now, Crandall said, the Fed is going "beyond the core-price concept" to look directly at wages. If wages rise quickly, the Fed will act, even it means pushing the economy over the cliff by raising interest rates high enough to kill off inflation.

Financial Times (FT.com)

Fed focus on tri-party repo risk

July 8, 2008

Louis Crandall, economist at Wrightson ICAP said: "The vulnerability of the tri-party repo system has been a recurring theme among Federal Reserve and Treasury officials in recent weeks," A potential problem with such a system is that the counterparty risk of billions of dollars worth of funding agreements is concentrated in the hands of two main players.

"Risk concentrations of this sort are under heavy scrutiny by the regulators," says Mr Crandall.

Dow Jones Capital Markets Report

FED WATCH: Central Bks Take The Lead In Credit Crunch Battle

July 2, 2008

Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, N.J.-based research firm, said lax regulatory oversight was the prime contributor to the current market bubble and the ensuing problems, rather than - as some have claimed - the low levels of fed-fund rates in 2003 and 2004.

"The regulatory framework that we have has a big gap that needs to be closed. We need an institutional framework that would have prevented the fraudulent underwriting in the subprime sector during the housing bubble," said Crandall.

The Wall Street Journal

Ahead of the Tape

June 30, 2008

"Higher energy prices mean worse outcomes on both of the Fed's objectives," says Lou Crandall, chief economist at Wrightson ICAP, referring to the central bank's dual mandate to keep employment growing and prices under control.

Financial Times (FT.com)

Overview: Oil's retreat sparks rally for equities

June 25, 2008

Economists were expecting a policy statement that left investors guessing as to whether the Fed would raise rates later this year. Such an outcome could spark volatile changes across equity, bond and currency markets and set a similar tone when Asia opens today.

Lou Crandall , economist at Wrightson Icap, said: "Our best guess is that the statement will be fuzzy enough to leave market expectations for Fed tightening essentially unchanged, but we think there is some danger that the market will put a bearish spin on the new wording." Officials at the Fed have recently stressed the need to contain inflation as the economy experiences sluggish growth and a deteriorating labour market.

The Wall Street Journal

Fed Vacancies Pose Challenge for Bernanke

June 25, 2008

Mr. Bernanke has already been on the speaking circuit more than any other Fed official. He has made nine speeches since the last Fed policy meeting, and Mr. Kohn has made five, according to a tally by research firm Wrightson ICAP. But the four most hawkish Fed officials together almost matched that total with 13 speeches or press interviews, despite having less influence over policy.


"The Fed's job is not to maintain the status quo," said Lou Crandall, chief economist at Wrightson ICAP. "The markets are not standing still."

The Wall Street Journal

Ahead of the Tape

June 23, 2008

The futures market has been slow to react; it still signals at least two rate increases through November.

"The behavior of the futures market has been perplexing," says Lou Crandall , Wrightson ICAP's chief economist. "It did seem like a very extreme reaction to the Fed's comments."

The move may have been partly technical. Some traders had borrowed money to place bets that the fed-funds rate would stay low. When the Fed signaled the plan could change, those leveraged players were forced out of their positions.


Gas prices top consumer worry, economists say

June 13, 2008

"Because housing has blotted out the economic sun for the last 2 years, we were not paying as much attention to the energy crunch," said Lou Crandall, Chief Economist at Wrightson ICAP. "Now it's forcing itself on everyone's attention, the nation has noticed."


ANALYSIS-Fed must take away the punch bowl slowly

June 12, 2008

Lou Crandall, chief economist at Wrightson ICAP in Jersey City , New Jersey , said the Fed gave itself plenty of wiggle room because it invoked a little-used rule authorizing it to take extraordinary steps in "unusual and exigent" circumstances. Because the Fed defines what constitutes "exigent" times, it decides when conditions have calmed sufficiently to close the credit door.

"Once there is a sense that we have mapped the mine field, and that we know at least where upcoming explosions are likely to be, even if they haven't all been set off yet, once that happens, weaning Wall Street from this will be easy," he said.


Paulson Finds Fed Won't Help With One-Year T-Bills

June 2, 2008

"It's going to be much more difficult for dealers to make markets if there's not a backstop source of supply," said Louis Crandall , chief economist at Wrightson ICAP, a Jersey City, New Jersey-based government finance research firm. "They know that if they sell a security that they are unable to source in the market, they can also borrow it from the Fed. But if the Fed doesn't own it, then they have to be much more careful."

Financial Times

Libor Calculation to Remain Unchanged

May 30, 2008

"Now that there is less reason to think the BBA will tinker with how Libor is set, the market will focus on the underlying issue: why are unsecured rates so high compared with the Fed funds rate," said Lou Crandall, chief economist at Wrightson Icap.

"The high liquidity premiums seen in Libor reflect the substantial deleveraging of the financial system and balance sheet constraints of banks."


Fed's Direct Loans to Banks Climb to Record Level

May 15, 2008

"The fact that banks are willing to take advantage of it may be a good sign for the market," said Louis Crandall , chief economist at Wrightson ICAP LLC in Jersey City , New Jersey . "They're willing to take advantage of cheap money and" lend it on to customers, he said.

The Wall Street Journal Europe

Libor's guardian bristles at bid for alternative rate --- U.K. bankers' group says review due soon; need for confidence

May 2, 2008

On Wednesday, ICAP PLC, a London broker-dealer with offices in New York , said it plans to launch a new measure of the rates at which banks borrow dollars. ICAP expects to begin publishing the rate, known as the New York Funding Rate, or NYFR, as soon as next week, said Lou Crandall , chief economist at Wrightson ICAP, a New Jersey research firm that is part of the ICAP group. Mr. Crandall said NYFR isn't intended to replace Libor.

The New York Times

Hard Times, but Your Lips Look Great

May 1, 2008

But do economists, and not just companies that need to move a lot of lip color, believe that lipstick sales could skyrocket as the economy tanks? And what's the draw of lipstick in particular for women worried about having to pay as much for gas as they would a handbag?


Three sorts of products sell robustly during tough times, said Lou Crandall, the chief economist at Wrightson ICAP, an independent research firm.

The first is what economists call traditional inferior goods, what people have to buy when they can no longer afford their favorites. If you're a salmon lover eating tuna casserole, you're chewing on inferior goods.

Lipsticks aren't inferior goods, economists say, but they could be small indulgences, an inexpensive treat meant to substitute for a bigger-ticket item. Or lipsticks could also be morale boosters, like Charlie Chaplin films were during the Depression. A warm shade that perfectly matches your skin tone might make you forget how far your 401(k) has tanked.

Although this relationship exists, Mr. Lauder was wrong about one thing: counting lipstick purchases won't confirm whether we're in a recession. "It doesn't surprise me that lipstick sales go up," Mr. Crandall said, "but if I had to choose my top economic indicators to take to a desert island with me, I'm not sure it would make my top 20."

Not the least because lipstick sales aren't exactly economic indicators used by the news media.

"ABC News samples consumer confidence every week," Mr. Crandall said. "We don't have lipstick sales on a weekly basis. This is because they are more granular. The smaller the economic data becomes, the more volatile it tends to be, and the harder it is to extract the underlying signal."

American Banker

On Balance, Many See Fed Efforts Taking Hold

April 30, 2008

The part the Fed played in the bailout of Bear Stearns Cos. is believed to have encouraged the move of new capital to banks. "One of the areas where the Fed has clearly helped restore confidence is by providing more support for the market view that debtholders of systemically important financial institutions will always be made whole," notes Wrightson ICAP chief economist Lou Crandall.

Financial Times

Debate over Libor breeds a crisis of confidence

April 22, 2008

"Once the press starts reporting that a bank's funding costs are out of line with other institutions, the perception of credit problems can quickly become reality," says Lou Crandall , economist at Wrightson ICAP

"The dollar-denominated interbank deposit market is purely hypothetical when the Libor poll is taken at 11am in London ," says Mr Crandall. "Banks are merely guessing where money will be available when the New York market opens. It is not surprising that they make guesses that avoid unwelcome publicity."


Market wary of liquidity actions Fed is mulling

April 9, 2008

The Fed has already committed about half of its $900-billion-plus balance sheet to fund these plans known by their acronyms -- TAF, TSLF and PDCF, analysts said.

These liquidity measures have indeed helped cash-strapped banks and financial companies, which have collectively wrote down more than $200 billion of bad assets. But they have not been a cure, either, analysts said.

"They want to signal that their hands are not tied," said Lou Crandall , chief economist at Wrightson ICAP in Jersey City , New York , in reference to news of the Fed's plan of more liquidity moves.


Moral Hazard, Lehman, SEC-CFTC, AIG Writedowns: Compliance

April 1, 2008

Treasury's proposal would "create a more coherent supervisory scheme'' by ending "some of the inconsistencies arising from today's patchwork system," Lou Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm, said in a report.

Still, expanding the Fed's role to stabilize markets would exacerbate the "moral hazard problems" stemming from the central bank's decision to lend money to investment banks, said Crandall, who used to work at the New York Fed. So-called moral hazard is the notion that bailouts encourage financial companies to take risk because they assume the government will always come to the rescue.

AFX International Focus

FOCUS: Paulson financial regulation reform plan already faces discounting

March 30, 2008

Paulson may be getting off to a fast start in the post-credit-crunch regulatory debate, said Lou Crandall at Wrightson ICAP, but 'a fast start doesn't mean there will be an early finish to the regulatory reform process.

'It usually takes years for new collective wisdom to emerge in Washington policy circles on almost any subject and the free-market consensus that has dominated the financial regulation debate for so long has only been shredded over the past few months.'

American Banker

How Much Risk? This Time, Fed Is Being Asked; Discount window shift, Bear role spur calls for disclosure

March 19, 2008

Lou Crandall , the chief economist at the policy analysis firm Wrightson ICAP LLC, said the Fed will have to make some adjustments in working with companies that often play under different rules than the ones governing commercial banks.

"Securities firms are regulated differently from banks, and they are encouraged to be prudent on one hand, but they take risks that would not be acceptable to a banking organization," he said. "Securities firms are not required to be as soundly capitalized."

The Wall Street Journal

Firms Wrestle With Loans' Stigma

March 19, 2008

Fed officials maintain that just the existence of all of its expanded lending programs is an important confidence builder. Even if the new program for securities firms isn't used much at first, "the Fed may decide it doesn't mind making this a remote backstop," said Lou Crandall, chief economist at Wrightson-ICAP.


Bernanke Plays `Whac-A-Mole' With Turmoil in Markets

March 17, 2008

"The Fed is attempting to catch some of the spillover and plug some of the holes in the system," says Louis Crandall , chief economist at Jersey City, New Jersey-based Wrightson ICAP LLP, a unit of ICAP Plc, the world's largest broker for banks and other financial institutions. "But the amount of pressure in the system is still building and could exceed the Fed's traditional resources."

Dow Jones Newswires

FED WATCH: Fed Must Hope Bailouts Stop At Bear

March 14, 2008

The exotic side of the action was the Federal Reserve Board's announcement that it had given the transaction its official approval, a move that caught observers off guard. The arrangement takes the risk off of JPMorgan - if Bear Stearns fails to meets the terms of the discount window, the risk is the Fed's alone.

"This is a much more radical step for the Fed than the textbook version that we first assumed when the news came out," said Lou Crandall , chief economist with Wrightson ICAP.

New York Times

Fed Hopes to Ease Strain on Economic Activity

March 12, 2008

Despite the staggering sums being offered by the Fed over the past week, some analysts warned that the new infusion of money might not be enough to fill the hole caused by the losses on ill-conceived mortgages during the housing bubble.

"They are essentially creating a $300 billion bank out of nothing," said Lou Crandall, chief economist at Wrightson ICAP, a financial research firm.

But while the Fed's moves may relieve short-term cash problems, Mr. Crandall said, "it doesn't solve the fundamental issue, which is the decline of capital in the banking system."


Fed turns on the spigot of money again; Mortgage-backed securities will be swapped for safer Treasurys

March 11, 2008

"The Fed's new term securities lending program is its most creative, and best, idea yet," wrote Lou Crandall , chief economist for Wrightson ICAP. "It will provide financing for an asset class [residential mortgage-backed securities] that is under severe pressure and which the Fed cannot finance through regular operations."

Asset Securitization Report

Repos Losing Steam as Stand-In Financing

March 10, 2008

"What we've seen over the last several weeks - and accelerating with the Thornburg problem - is that the repo market itself has started to contract," said Lou Crandall , chief economist for Wrightson ICAP.

This contraction accelerated as dealers became more cautious about the sizes of their own balance sheets, and increased the haircuts charged to customers through prime brokerage operations, said Crandall.

The Wall Street Journal

Ahead of the Tape: For Bernanke, Advice Keeps Rolling In

March 3, 2008

Lou Crandall , chief economist of Wrightson ICAP, says wounded financial institutions need a timeout to repair their balance sheets. He wants bank regulators to encourage a broad moratorium on dividend payments.

"We're all ringing our hands about capital, but the financial system is still paying out a tremendous level of dividends," he says. If banks stopped paying dividends for several months, that would give the weaker banks cover to heal themselves, he says.


Bernanke, Bush Fail to Build Better Economy With Cuts, Stimulus

February 25, 2008

"The Fed is trying to stabilize the financial markets, the real economy and the price level with a single interest rate," says Louis Crandall, a former Fed official who's now chief economist at Jersey City, New Jersey-based Wrightson ICAP LLP. "That's not easy to do."

Dow Jones International News

MONEY TALK: The Dying Art of Dissent

February 1, 2008

But dissent on the basis of forecasts takes some mettle, says Lou Crandall , chief economist at Wrightson ICAP.

"The membership of the FOMC is quite aware of how fallable individual forecasts, as well as themselves, can be," he said. "So that raises the hurdle on casting a dissenting vote."

New York Sun

Fed's Meeting More Closely Watched Than Most

January 30, 2008

"Striking the right balance in Wednesday's policy statement will require careful wording," the chief economist for Wrightson ICAP, Lou Crandall , wrote in a research note. "The goal is to appear flexible rather than stubborn and - most important - to instill confidence rather than prolong the crisis atmosphere."

CNN Money

Follow the Leader

January 30, 2008

"The issue here is less what's been done but how it's been presented," said Lou Crandall, chief economist for Wrightson ICAP. "The presentation is a problem right now because of the perception that the Fed is following rather than leading."

The Wall Street Journal

Ahead of the Tape

January 22, 2008

"The big macro issue for this decade is what the U.S. current-account adjustment will look like," says Lou Crandall , chief economist at Wrightson ICAP. "Any adjustment will require an adjustment in consumer spending, the question is will it be orderly?"

Herald Sun

The big question in the US How deep is the strife?

January 19, 2008

Like Matus, Wrightson ICAP chief economist Lou Crandall isn't forecasting a recession -- for now.

"There are basically two camps right now and one camp is very negative and the other camp is apprehensive," explains Crandall.

"The best case is being apprehensive and that's where I am."

But Crandall says it would only take another month of economic data like that reported in December before he jumped ship.

A spike in the number of Americans applying for unemployment insurance and lower than expected retail sales in December have been huge factors in feeding recession fears, he said.

The problem, says Crandall, is that volatile December numbers don't typically carry into the new year and there's been little in the data released so far in January to back up the thesis that things are going from bad to worst.

"It is primarily a concentrated one-month dip at a time when the economic data are often volatile," Crandall said.

"The earliest and most alarming sign was in weekly claims for unemployment insurance. Thus far in January those have turned around completely. It doesn't disprove the case that we've a serious problem, but there is a still a case to be made for apprehension.


Fed Signals More Aggressive Response to Faltering Expansion

January 14, 2008

"The crucial change in Bernanke's language last week was the reference to the need for insurance," Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City , New Jersey , said in a note to clients. Until now, officials "have tended to describe the Fed's rate cuts as being scaled to the size of the projected problem," he said.

The Times

America 's trade deficit hits high despite record export figures

January 12, 2008

Lou Crandall , chief economist at Wrightson Icap, a research firm, said: "The deficit increase is mainly down to the rising price of oil. If you look at the inflation-adjusted figure then trade is basically improving and that trend is likely to continue."

The Times

Bush ponders tax rebates as Goldmans says recession will hit US this year

January 10, 2008

Lou Crandall , chief economist at Wrightson ICAP, a research firm, said: "A one-off tax rebate of, say, $75 billion would have a negligible impact, since it represents just a shade over 0.5 per cent of GDP. A permanent tax cut of that amount would be much more effective. For a one-off payment, the rebate would need to be far higher than the Government could possibly contemplate."

Arkansas Democrat Gazette

Record of Fed meeting shows growth concern

January 4, 2008

Policymakers debated the Fed's new temporary tool to alleviate bank funding pressures, the records showed. The resource, where the Fed auctions cash to banks in return for a variety of collateral, raises concern about "longer-run incentive effects," according to "a few" officials, the minutes said.

The Fed didn't elaborate on the discussions, which preceded the Dec. 12 announcement of the Term Auction Facility. The central bank added $ 40 billion of funds through two Term Auction Facility operations last month and plans two more in January.

"It's definitely going to get a hard look" before any decision to make the Term Auction Facility permanent, said Louis Crandall , a former New York Fed official and now chief economist at Wrightson ICAP LLC, a Jersey City, N. J.-based bond research firm.

Los Angeles Times

MARKETS; Stocks kick off '08 with a thud

January 3, 2008

Stocks fell Wednesday in part because of a growing expectation on Wall Street that monthly U.S. job numbers due Friday morning will come in on the light side, said Lou Crandall , economist at Wrightson ICAP, an economic research firm in Jersey City, NJ.

"With that on the horizon, it was a perfectly reasonable day to take your chips off the table," Crandall said.


Fed lends more to banks, N.Y. dominates auction

December 27, 2007

The TAF data suggested that foreign banks with U.S. operations pushed hard to obtain funds, said Lou Crandall , chief economist at Wrightson ICAP in New York .

"It would be consistent with the notion that U.S. branches of foreign banks were aggressive bidders," Crandall said.

"I wouldn't be surprised to see New York (banks) dominate again," Crandall said of future TAF auctions.

The Wall Street Journal

The Mortgage-Crisis Fallout: Fed, ECB Moves Have Worked, but Worries Remain --- Weakness in Housing, Concerns Over Economy Continue to Be Threats

December 21, 2007

The central banks have "alleviated a lot of the train-wreck fears about year-end," says Lou Crandall , chief economist at Wrightson ICAP, a New York bond-research firm. While the central banks' actions are temporary -- extending only through January - "it buys us more time, which is the only thing that's going to resolve this."


Banks borrow $34 billion from central banks; Strong demand seen at special auctions for end-of-year funds

December 19, 2007

With 93 banks bidding, there was clearly no stigma to participating in this program, as has been the case with the Fed's primary credit facility (also known as the discount window), according to Lou Crandall , chief economist for Wrightson ICAP.


"The relatively high stop-out rate probably says more about the cost of alternative sources of funds than about severe year-end funding problems," Crandall wrote.

Financial Times

FT.com site : Bankers look to Fed to restore confidence.

December 10, 2007

"The bottom line, though, is that the Fed needs to find some way to bolster market confidence over the coming weeks, whether through rate actions, creative open market operations or changes in the administration of the discount window," said Lou Crandall , economist at Wrightson ICAP.

CQ Weekly

Carrying a Crisis Over the Threshold

December 9, 2007

"Washington has stood back largely approvingly watching the financial sector radically remaking the mortgage industry, but now Washington is almost certainly going to step in," said Lou Crandall , chief economist at Wrightson ICAP, a New Jersey investment and economic research firm.

Turkish Daily News

Fed strives to increase credit to US companies

December 6, 2007

"The Fed has to re-liquefy the markets to reduce the risk of a financial accident," said Lou Crandall , chief economist at Wrightson ICAP LLC, a Jersey City-based research firm.


Fed May Couple Rate Cut With New Measures to Increase Credit

December 5, 2007

"The Fed has to re-liquefy the markets to reduce the risk of a financial accident," said Lou Crandall, who used to work at the New York Fed and is now chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm that focuses on government debt.

The Wall Street Journal

It's Official: Wall Street Correction --- Fed Acts to Calm Jitters, Ease Pressure on Banks As Credit Crisis Deepens

November 27, 2007

For now, the commitment to act "was important because people are anticipating a liquidity squeeze at the end of the year that could put heavy upward pressure on overnight rates," said Lou Crandall , chief economist at Wrightson Associates, a Wall Street research firm.

Financial Times

FT.com site : Fed acts to ease pressure on money markets.

November 26, 2007

''I expect dealers will be more aggressive in posting mortgages and agency paper as collateral, rather than Treasuries,'' said Lou Crandall , economist at Wrightson ICAP. ''This is likely the start of several such term repos, and the Fed is taking a forward approach, rather than letting dealers assume they will turn up.''

The Wall Street Journal

Ahead of the Tape

November 15, 2007

"The market thinks that the risks in the outlook are skewed extremely in one direction, with no risk of a rate hike and substantial risk that things can fall apart," says Wrightson ICAP economist Lou Crandall.

The Times

Bernanke clears the fog around the Fed

November 15, 2007

Lou Crandall, chief economist at Wrightson ICAP, the research firm, said that the new communication approach would "appropriately deflect attention for GDP point estimates" by giving more discussion on the background thinking to the Fed's decision and relatively less attention to its final, collective, conclusion.

"It will eliminate some uncertainty and confusion and help investors to anticipate interest rates better in the short term," Mr Crandall said. "It will make it easier to see how your views stack up against the full range of the FOMC's views."

Today ( Singapore )

When reality cuts; Bernanke 'reluctant' to slash rates but may end up doing so

October 30, 2007

"The Fed is reluctant to ease," says Mr Louis Crandall , chief economist at New Jersey-based Wrightson Icap LLC, a unit of Icap Plc, the world's largest broker for banks and other financial institutions. "But it also doesn't want to unsettle the financial markets unnecessarily."

Financial Times

Asset-backed sector continues to shrink

October 19, 2007

"It seems that the chief goal of the proposed master conduit would be to provide liquidity commitments," said Lou Crandall, economist at Wrightson ICAP. "This is likely to buy time for the sector to sort out its problems and unwind some of the most complex exposures."


ANALYSIS-Fed funds market hints at turbulence calming

October 5, 2007

"Apart from the swings around quarter end when funds are always more volatile, conditions in the overnight market have been much closer to normal since the FOMC (policy-setting Federal Open Market Committee) eliminated near-term uncertainty about the target rate on Sept 18," said Lou Crandall, chief economist at Wrightson ICAP, in Jersey City.


Fed Expected to Lower Federal Funds Rate

September 18, 2007

Mr. LOUIS CRANDALL (Economist, Wrightson ICAP): We face an information deficit in the market. We know there are subprime losses out there. We don't know exactly where they all reside. And so anyone who is potentially at risk of having subprime problems is having trouble attracting funding right now.

The Wall Street Journal

Why Libor Defies Gravity --- Divergence of a Key Global Rate Points to Strain

September 5, 2007

"Higher Libor rates affect the whole economy by tightening the budgets of borrowers large and small," says Lou Crandall, chief economist with Wrightson ICAP in New York . "It hurts corporate profits and tightens household budgets, too."


New York Fed Accepts Asset-Backed Paper as Collateral

August 24, 2007

"It creates a fast-track avenue for tapping the discount window for some of the assets at the heart of the liquidity logjam," said Louis Crandall , chief economist of Wrightson ICAP in Jersey City , New Jersey . "That would ease the strain on the commercial paper market considerably."

Washington Post

Investors Lay Low, Markets End Flat

August 24, 2007

"There were no new major upsets in the market, which just gave the system a little bit more time to sort through the problem at hand," said Louis Crandall , chief economist at Wrightson ICAP. "We haven't resolved all of the financing issues.so there's still an opportunity for more problems to crop up. It's just very hard to say how that process is going to sort itself out."


Fed Discount Lending Rose to Average of $1.2 Billion

August 23, 2007

The data "shows there was an average of $1.3 billion in borrowing from Friday to Tuesday, above Wednesday's solidarity borrowing by the four banks," said Lou Crandall, chief economist at Wrightson ICAP, LLC, in Jersey City , New Jersey . "The fact that the other borrowings disappeared by Wednesday shows that banks have better options than borrowing at 5.75 percent from the discount window."

BusinessWeek Online

A 'Stealth Easing' by the Fed? Despite some heavyweight industry opinion, there is no proof yet that the Federal Reserve is veering from its target for interest rates

August 20, 2007

One of the top authorities on the federal funds rate, Lou Crandall, chief economist of Wrightson ICAP in Jersey City , says, "I think that calling this a stealth easing is extremely misleading."


By not mentioning the target rate, the Fed would have signaled the market with a wink and a nod that it was willing to let the funds rate drift below 5.25%. Instead, the Fed on Aug. 10 and the Federal Reserve Bank of New York on Aug. 16 specifically cited the 5.25% target. Says Crandall: "The Fed parses every syllable of those statements for them to mention 5.25, that was an important point to them."


Crandall Says 'Sensible' Fed Can Never Say Never

August 15, 2007

The Federal Reserve "will do its best" to avoid cutting interest rates before its next meeting, according to economists at Wrightson ICAP LLC. Even so, recent turmoil in credit markets introduces "new variables" that make forecasting trickier, they say.

"Sensible central bankers never say 'never,'" writes Louis Crandall , chief economist at Wrightson ICAP based in Jersey City , New Jersey , in a commentary today. An unscheduled rate cut will become less likely as Chairman Ben S. Bernanke and the Federal Open Market Committee get closer to their next meeting on Sept. 18, Crandall writes.

Financial Times

Ft.com site: Global overview: US succumbs to late sell-off

August 15, 2007

Lou Crandall, economist at Wrightson ICAP said: "The Fed will do its best to avoid an inter-meeting rate cut but sensible central bankers never say 'never'. Deepening chaos in the payments system over the coming week could trigger an unscheduled rate cut."

Dow Jones International News

OFF THE RUN: Volatile Fed Funds Rate Least of Fed's Problems

August 15, 2007

The [Fed funds] rate tends to open above the target rate in the morning, then dive below 1% in the final hours of the session. That has changed a little over the last couple of days, when the funds rate has actually opened slightly below the target rate before crashing in the afternoon.

Lou Crandall, senior economist at Wrightson ICAP said the reasons for this behavior are two-fold. With banks somewhat reluctant to lend to their counterparts, the rate tends to be pressured higher early on, not least by demand for dollar loans from European banks. With overseas banks the center of subprime exposure concerns in recent days, U.S. institutions have ramped up the cost of lending to them.

The rate has generally ticked lower when U.S. banks open their doors. The Fed's daily morning injections of liquidity have further eased the strain. However, it's not until the closing of the securities wires - the central system for transferring funds in the U.S. - late afternoon that banks are willing to start dumping reserves and lending out cash.

That's because one of the greatest fears in the financial system at present is that banks will be called on to back up the credit lines they have extended to issuers of asset backed commercial paper. This short-term debt is the main funding source for institutions' purchases of securities in the troubled residential mortgage-backed market.

As issuers have had increasing trouble rolling over the commercial paper, speculation has mounted that some may call in credit lines.

"Banks have extended backstop liquidity lines of credit to support the huge expansion of asset-backed commercial paper in recent years, and they can't be sure until late in the day whether any of those lines will be tapped," Crandall wrote on Wrightson's Web site.


August 16 is the start of a new maintenance period - the two week blocks during which banks must keep their average end-of-day reserve levels at the legally required level. As a result, the huge boost in reserves banks received last Friday will no longer count toward their average reserve level.

"Excess reserves become valueless and...the banks will be starting almost from scratch," Crandall said. He expects the Fed to carry out its usual 14-day repo Thursday at around 8.30 a.m. EDT to steady the market.

If the Fed gets the balance wrong, expect to see more see-sawing in the fed funds rate in the days ahead.

Reuters News

ANALYSIS-Euro-zone banks pay premium for dollar funds

August 14, 2007

"Time-zone issues become a serious problem when a financial scare erupts during the European trading session," says Lou Crandall, chief economist at Wrightson ICAP. "Anxiety levels soar during the long wait until New York opens and liquidity providers enter the market."

New Zealand Press Association

Central Banks Soothe Market Again with Injections

August 14, 2007

Analysts said a global credit crunch seemed to have been averted for now. But until the full extent of losses related to the US subprime mortgage market had been revealed, the market will remain on the defensive. “ This particular eruption appears to be fading, but it is the symptom that is fading and the underlying problem, which is that we don't know the exact location of subprime losses, remains, ” said Lou Crandall, chief economist at Wrightson ICAP. “ The system's vulnerabity to these sorts of liquidity issues is still present. ”

New Zealand Press Association

Fed-ECB Currency Swap Politcally Tricky-Wrightson

August 13, 2007

The Federal Reserve may be politically hampered in requesting a currency swap with the European Central Bank even if such a move could help relieve a squeeze in money markets, said analysts at Wrightson ICAP in a note to clients on Monday. ``The Fed would have a hard time explaining to Congress why it is reasonable to provide financing to support foreign investors caught in the subprime problem when the Fed is not willing to underwrite dicey real estate loans at home,'' said Lou Crandall, chief economist at Wrightson ICAP.

Crandall, a well-known money market economist on Wall Street, said that the dollar-funding needs of European banks was at the root of the cash crunch in money markets that prompted hefty injections of funds by the ECB and Fed on Thursday and Friday.


Crandall also said a currency swap would weaken the Fed's hand in fending off proposals from Congress to use its balance sheet for interventions against any country's labelled currency manipulators, as is being mulled by the Senate.

The Fed set up currency swaps shortly after the Sept. 11 attacks with the ECB and Bank of England to keep dollar funds flowing to Europe, but the ECB only used the facility for three days. Crandall said the creation of the swap line alone back then helped get more money flowing again.

In the past two years European banks have become very reliant on raising their funds in the US interbank market. The drying up of liquidity in London hours on Thursday then left banks scrambling for scarce funds and created a panic, he said.

Further ECB injections of euro funds would not help alleviate the dollar demands of banks, and money markets are likely to stay volatile until European banks show they can meet their funding needs calmly, Crandall said.

Los Angeles Times

US woes jolt world markets; A major French bank's troubles with sub-prime loans reverberate through Europe, Asia.  Dow, other gauges dive.

August 10, 2007

Lou Crandall, an economist at investment firm Wrightson ICAP in Jersey City, N.J., said the central banks "were essentially acting as the lender of last resort" to keep financial markets from seizing up, which in the worst-case scenario could turn into a cascade of banks, brokerages and other financial companies being unable to pay what they owe one another.

The Wall Street Journal

That Was No Vacation for Stock, Bond Investors --- Amid Mortgage Tumult, Worries About Curbs On Borrowing Spread

August 4, 2007

With corporate balance sheets in good shape, the rise in bond yields and drop in bond issuance doesn't appear to have any economic basis, says Lou Crandall, chief economist at Wrightson ICAP. Rather, liquidity -- funds available for investing -- has dried up as investors have pulled in their reins. "This is still a liquidity event," says Mr. Crandall. "But the longer it goes on, the more potential it has to have broader repercussions."

Even though corporate-bond yields have risen relative to comparable Treasury notes, Mr. Crandall points out they are still fairly low on an absolute basis. Part of the problem is that companies worry that tapping the debt market during such a volatile period could be seen as a sign of desperation. So instead, they put off their offerings, which also means they may put off the things they planned to do with the money. Many economists had hoped that increased corporate spending would help push the economy along in the latter half of the year.

Reuters News

TREASURIES-Bonds jump higher as stock market tumbles

August 1, 2007

"On balance, most of the indicators came in below expectations but not by large amounts," said Lou Crandall, chief economist at Wrightson ICAP in New York, adding "it paints a softer picture, but it's not enough to change the market's outlook."

Calgary Business Herald

Bernanke in a pickle over food prices; Ethanol blamed for 23% hike

July 17, 2007

"Central banks are more conscious than they've ever been of the danger of allowing inflation expectations to become unmoored," says Louis Crandall, chief economist at Jersey City, N.J.-based Wrightson ICAP LLC, a unit of ICAP PLC, the world's largest broker for banks and other institutions that trade in financial markets.

Dow Jones Commodities Service

DJ AT A GLANCE: Fed Leaves Rates Steady, Emphasizes Inflation Risk

June 28, 2007

"The Fed decided the easiest way to signal no change in the policy outlook was to hold the number of changes to the policy down to the bare minimum. The controlling balance of risks paragraph was identical to those of the past two meetings. The message: recent short-term swings in the data haven't altered the Fed's basic forecast," said Lou Crandall, chief economist at Wrightson ICAP

The Wall Street Journal

Ahead of the Tape

June 28, 2007

Gross corporate tax receipts collected by the Treasury Department in the second quarter grew by 0% to 4% from a year ago, according to Bank of America.

By comparison, the annual growth of corporate tax receipts from the fourth quarter of 2004 to the end of 2006 have ranged from 18% to 57%, according to Lou Crandall, chief economist at Wrightson ICAP. In the past three quarters, growth has averaged about 16%.

"There's a very clear downward drift," says Mr. Crandall. It follows logically that if growth in corporate tax receipts is slowing, then the profits that drive the taxes ought to be slowing, too.

Reuters News

PREVIEW-With inflation easing, Fed likely to stay course

June 21. 2007

Economists said it is likely the Fed will make only minor tweaks to its post-meeting statement.

"Since the policy outlook really hasn't changed much, except for the fact that their confidence level in their forecast has probably edged up some from May, they'll put a premium in maintaining as much stability in the language as they can," said Lou Crandall, chief economist for Wrightson ICAP in Jersey City, New Jersey.

The Fed may also be reluctant to make changes to its statement before seeing revisions to economic data due over the summer, Crandall added.

Dow Jones International News

Best Practices Guide Gives Repo Mkt Another Go At Reform

June 14, 2007

Treasury issues continue to go special on a regular basis, albeit not at the deep and protracted levels that have caused problems in the past. And market activity continues to grow. According to New York Fed data, gross dealer repo positions have now surpassed the $4 trillion mark - double the level of five years ago.

Of course, it may take real enforcement actions to flesh out some of the grey areas, while the group that drew up the guide makes it clear it's a work in progress.

Yet for Lou Crandall, chief economist at Wrightson and long-time Treasury market watcher, the key problem of past interventions was that officials wanted traders to "be profit maximizers, but not too much." By getting into details, this effort achieves a lot more.

It's a "workable solution," Crandall said, "perhaps the best we can do."

Reuters News

ANALYSIS-T-bills may hint of rate cut sooner than expected

May 17, 2007

Surging tax receipts have scaled back the Treasury Department's need to issue bills and the reduced supply is making bills more scarce and more expensive, forcing their rates down.

"It's a seasonal supply issue in the bill sector. Bill sizes were slashed during the April tax season, and are still below year-ago levels in mid-May," said Lou Crandall, chief economist of Wrightson ICAP in Jersey City, New Jersey.

There is a close correlation between reduced one-month bill issuance and lower rates.

"The relationship is looser in the 3-month sector, but similar forces are at work," said Crandall, citing a shortage which is likely to persist through the end of June.

Mist News

Bernanke May Be Too Slow to Cut Interest Rates as Growth Stalls

May 7, 2007

''The Fed has had success with a stick-to-your-guns approach over the past year'' as the economy has avoided both a recession and a rise in inflation, says Louis Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a unit of  ICAP Plc, the world's largest interdealer broker. ''The risk is that they may be less inclined to second-guess that policy than they should.''

Reuters News

U.S. one-day individual tax haul at record high

April 25, 2007

While some of those tax payments come from taxpayers who withheld less tax from their paychecks than they owed, much of it was owed on income from investments or profits.  

"This reflects the fact that Americans in high-income brackets had a very good year in 2006," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.  

Dow Jones Newswires

US Gen. Pace Cites May 15 As Key Date In War Budget Standoff

April 17, 2007

Analysts said the Pentagon's cash crunch isn't as critical as other Capitol Hill budget showdowns, which have the potential to shut down the federal government.  

For one thing, the Pentagon's short-term needs are only a fraction of the U.S. government's overall spending. This means they will be much easier to maneuver around than another impending collision with the nearly $9 trillion federal debt ceiling, which is not expected until at least autumn.  

"The difference is that there isn't a well-established ritual for playing out this particular bit of theater," said Lou Crandall, chief economist with Wrightson ICAP and an expert on federal debt management.  

"The military really doesn't want to get to the point where they establish the very cynical rules of engagement that govern debt ceiling episodes," Crandall said.

Reuters News

U.S. posts $96.27 bln March budget deficit

April 11, 2007

The March deficit was bigger than the $85 billion shortfall predicted by Wall Street analysts in a Reuters poll.  

Although revenues did slow in March, it may be too soon to conclude this is a sign of slowing growth in the U.S. economy, said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey and a longtime budget watcher.  

"The real question is how things look toward the end of the second quarter," he said, adding that April receipts are expected to be strong due to taxes paid on big bonus payments based on 2006 incentive plans.  

"April taxes reflect what happened last year. The only debate about April is whether taxes will be continuing the strong trend that we've seen recently or be the last hurrah for revenues," Crandall added.  

Dow Jones Capital Markets Report

US March Auto Sales -- In A Rut Again

April 3, 2007

Rebecca Lowry, an economist at Wrightson ICAP in Jersey City, N.J., noted that light auto sales were "not real bad, but weaker than we had expected."  

 Lowry estimates that domestic car sales were at a 5.1 million annual rate, domestic truck sales were at a 7.2 million rate and imports sold at a 3.9 million annual rate.  

 She noted that "Ford (Motor Co.) intentionally cut back on fleet sales, which pulled down total sales." In addition, she noted the adverse effect of higher gas prices and "possibly the colder weather at the beginning of the month."  

Dow Jones Commodities Service

FED WATCH: Communicating Outlook A Struggle For Bernanke

March 29, 2007

Some economists reckon the point the Fed now finds itself at is one where it will be for a while. "Our assumption is that the Fed will keep the new, softer inflation bias in place until one of two things happens: actual core inflation recedes, or the growth data deteriorate enough to justify a forecast of a rapid future deceleration in core prices," Wrightson ICAP forecasters told clients.  

"Even in a period of sluggish growth, we think it is likely to be a long time before either of those conditions is satisfied," the Wrightson forecasters asserted.  

The Wall Street Journal

Trade Gap Widens, Yet Outlook is Upbeat -- Economists Are Hopeful Exports Will Extend Rise And Oil Prices Will Fall

February 14, 2007

Lou Crandall, an economist at New York economic research firm Wrightson ICAP, said he shaved a half-point from his forecast for fourth-quarter growth to just 2.2%. Still, he said trade would probably contribute to U.S. output in the months ahead, as exports are on a rising trend and oil prices softened in January. 

Dow Jones Newswires

DoD: Iraq War Costing $10B Per Month At Start Of FY07

February 6, 2007

Analysts said the war spending isn't making much impression on the U.S. Treasury's borrowing costs. Wall Street is more affected by the political implications of soaring defense budgets than by any direct pressure on interest rates, said Lou Crandall, chief economist at Wrightson ICAP. 

"Given the liquidity of today's capital markets, an extra $100 billion would not have a massive effect on interest rates. But what we'd be buying for that $100 billion would almost certainly have a greater impact in one way or another," Crandall said. 

Reuters News

Bush budget surplus may vanish amid war, tax costs

February 5, 2007

But analysts view some of the revenue sources as unrealistic. The proposal assumes $7 billion in new revenue in 2009 from oil and natural gas drilling lease sales in the disputed Arctic National Wildlife Refuge -- a highly unlikely prospect given Democratic opposition. 

Wrightson ICAP Chief Economist Lou Crandall, a long-time budget watcher, said the budget plan is a useful document for specific proposals, but has limited use as an economic forecasting tool. 

"It would be useful if any administration had a track record of being able to implement these proposals, but Congress is the decider, so the budget is rarely a roadmap for actual outcomes," he said. 

Reuters News

Demise of US 3-yr notes seen least disruptive

January 31, 2007

If three-year notes fade away, older or "off-the-run," five-year Treasuries could replace them, analysts said. 

"There's a lot of seasoned five-year notes that roll down into that (three-year) range," said Louis Crandall, chief economist at Wrightson ICAP in New York. 

Reuters News

With growth on track, Fed looks set to stay course

January 29, 2007

The unexpected strength evident in many recent economic signals has led many economist to trim forecasts for Fed interest-rate cuts this year.  

"The big change from December to now has been an increasing likelihood that nothing's going to happen for the first half of 2007," said Lou Crandall, chief economist for Wrightson ICAP in Jersey City, New Jersey.  

Reuters News

US budget gap narrows fast, may breed complacency

January 23, 2007

Driven by strong corporate profits and gains in household income, revenues are pouring into the U.S. Treasury in record amounts. Barring any major economic shocks, the gusher is expected to continue. 

"The next few months are shaping up to be another boom time in tax collections," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey. 


Furthermore, federal revenues will soon flatten out as boomers begin to leave the workforce, turning these programs cash negative on an annual basis by 2017, [US Comptroller General David Walker] said. 

"Any deficit we run during the demographic fat years is regrettable," said Crandall. "In the short run, the trends are clearly favorable. That doesn't get any closer to starting to address problems we face 10 years from now." 

Reuters News

US Treasury seeks advice on receipts, debt needs

January 19, 2007

[A Treasury survey] also asked dealers to characterize market conditions for the "on-the-run" Treasury securities -- the most recent issue of a particular maturity of Treasury bonds or notes -- versus older, "off-the-run" securities. 

On-the-run securities are typically the most frequently traded and are the most liquid, commanding higher prices and lower yields than their older counterparts. 

"Part of what is behind Treasury's questions here is that they've been already reducing offering sizes across the board. They're now at a point where they're running out of room to cut individual offering sizes," said Lou Crandall, chief economist at Wrightson/ICAP in Jersey City, New Jersey.  

Crandall said that in order to keep remaining issues sufficiently liquid, the Treasury may need to consider eliminating certain maturities. Cutting heavily benchmarked maturities such as 2- and 10-year notes would not be attractive, but the 3-year note could be a candidate for elimination, he said.


US stocks shed opening gains.

January 16, 2007

This week, investors face a slew of data releases and will likely pay close attention when Fed chairman Bernanke testifies before Congress on Thursday. 

 "Barring any major surprises" in the data, Wrightson ICAP expects the Fed chairman "to play the role of a mild-mannered hawk this week, unhappy with current core inflation rates but increasingly optimistic about more favourable trends in 2007." 

The Wall Street Journal

U.S. Posts a Budget Surplus for December 

January 13, 2007

Receipts in December are often higher than in many other months because of quarterly income-tax payments and more income-tax withholding to account for year-end bonuses and seasonal staffing, the Congressional Budget Office said. This time, the sharp increase in receipts from a year earlier largely reflected a boost from corporate-tax receipts, it said. 

"At this point it would take a really startling turnaround in fiscal trends to get a year-over-year increase in the deficit" for the full fiscal year, said Lou Crandall, chief economist for financial market analysis firm Wrightson ICAP. 

Reuters News

Surging tax receipts to limit Treasuries supply 

January 9, 2007

"Budget results in line with our current projections would keep the deficit on a downward trajectory that is similar to that seen in the last (economic) expansion," of the late 1990s, wrote Lou Crandall, chief economist of Wrightson ICAP in Jersey City, New Jersey in a research report on Monday. 

"A similar schedule in the current cycle would eliminate the deficit by 2010," Crandall added. 

Dow Jones Commodities Service

Wrightson's Crandall: FOMC Avoids Fine-Tuning

December 12, 2006

"Our impression is that the Fed is trying to avoid using the statement to fine-tune its message to the market," said Lou Crandall, chief economist at Wrightson ICAP. He notes that rather than tweak the statement to make nuances, the FOMC is relying on minutes and speeches to flesh out policy statement. Bottom line: "the Fed still thinks there is a risk that inflation might not slow enough to keep funds as low as 5.25%."

Financial Times

Wall Street shrugs aside profit takers.

November 14, 2006

Investors now await the consumer price index for September due on Thursday.

Lou Crandall, economist at Wrightson ICAP noted the [PPI] "report doesn't change our forecast of a 0.2 per cent increase in the core CPI." Still he concedes "the fact that PPI food prices surprised us on the downside (-0.8 percent) does shift the risk in the overall CPI."

The Wall Street Journal

Ahead of the Tape

December 15, 2006

Wrightson ICAP chief economist Lou Crandall reckons the economy will stay strong and the labor market will stay tight in the months ahead, meaning core inflation isn't going to move down fast enough for the Fed to take higher interest rates off the table. Coupled with that view is a belief that the housing and automotive sectors will work through their excess inventory quickly, without hitting other areas of the economy.

The alternative? The glut of houses and cars causes collateral damage for other areas of the economy, slowing inflation and getting the Fed to ease. Part of the problem that he and forecasters are having, says Mr. Crandall, is that "the best-case and worst-case scenarios look exactly the same." Both cases involve the housing and auto sectors trying to work off excess inventory quickly. Forecasters can see this happening and come up with completely different views of what it means.

Dow Jones Commodities Service

Wrightson's Crandall:  FOMC Avoids Fine-Tuning

December 12, 2006

"Our impression is that the Fed is trying to avoid using the statement to fine-tune its message to the market," said Lou Crandall, chief economist at Wrightson ICAP. He notes that rather than tweak the statement to make nuances, the FOMC is relying on minutes and speeches to flesh out policy statement. Bottom line: "the Fed still thinks there is a risk that inflation might not slow enough to keep funds as low as 5.25%."


FED FOCUS - Fed to stick to anti-inflation bias for now

December 6, 2006

"There is very little chance that the Fed will change its balance of risks," said Lou Crandall, chief economist at Wrightson ICAP in New York. Crandall said the Fed would wait until economic prospects were clearer before altering its assessment.

Wall Street Journal

Why Darker Clouds Might Eclipse Sunny Unemployment Forecasts

December 4, 2006

Lou Crandall , chief economist at Wrightson ICAP, says the U.S. labor market should be fine. The housing and auto sectors are working down excess inventories this quarter, and that shouldn't have a major impact on other sectors beyond winter, he says. Moreover, large revisions boosted the estimate of August and September payroll growth, which suggests the job market is "generally in very good shape," Mr. Crandall says.

Still, Mr. Crandall says he will keep a keen eye on the November unemployment report. "Any downside surprises in Friday's report would have a greater-than-usual impact on our expectation" for economic growth, he says.

Wall Street Journal

Fed Keeps Policy Attention Firmly on Inflation --- Minutes of Latest Meeting Suggest Near-Term Cut In Rates Remains Unlikely

November 16, 2006

 Lou Crandall , chief economist at Wrightson Associates, said the pattern in recent months has been for investors to mark up the odds of a rate cut on economic data, then mark them down on commentary from the Fed, such as speeches or statements. Investors, he said, are "overreacting to the bond-friendly news and underreacting to the unfriendly news."

Market News International

Analysts Ponder Significance of NY Fed SOMA Managemnt Changes

November 14, 2006

Analysts differed Tuesday on the significance of a New York Federal Reserve Bank announcement of changes in the management of its System Open Market Account.

Lou Crandall , chief economist at Wrightson ICAP, said that "from the Fed's side, it's not a huge deal, but the market is looking at it in terms of how it will affect the pattern of coupon passes. ... It's possible it will allow the Fed to buy more of the longer-dated stuff, but I don't think that was the driving consideration for them."

Wall Street Journal

SEC Shines Light on Obscure Market --- Probe Aims at Strategy Of Allegedly Manipulating Treasurys to Limit Supply

November 1, 2006

Triparty repos are widely used and generally make it more efficient to finance transactions. But these arrangements "also allow firms to park scarce securities in a collateral pool without losing control of them," says Lou Crandall, chief economist at Wrightson ICAP.

Market News International

Big Japan Lending of US Tsys Calms US RP Mkt; Some Eye 5-Yr

October 18, 2006

Traders in U.S. Treasuries are concluding that fewer primary dealer actions in the repo market, but also substantially higher lending of U.S. Treasuries securities by Japan, is behind the recent quiet September's quarter-end period.

"One factor that had been cited as a potential explanation for the more liquid conditions in the general collateral market at the end of September was the possibility that securities holders, especially in the foreign central banking community, had become more flexible in their practices, and were now less prone to pull their securities off the market as (quarter-end) statement dates approached," said Lou Crandall, chief economist at Wrightson ICAP.

"There is at least some circumstantial evidence in favor of that view," said Crandall.


ANALYSIS-U.S. budget deficit could shrink further in 2007

October 16, 2006

"As long as we don't find new things to spend money on and we have moderately sub-trend (economic) growth in the mid-2 percent range, it looks as if some improvement (in the [federal budget] deficit) is likely," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.

Crandall is currently forecasting a fiscal 2007 budget deficit of $200 billion to $250 billion. The midpoint of that range would represent a 9.2 percent narrowing over fiscal 2006, which ended September 30.

However, if U.S. economic growth slows to around 2 percent or less in coming months, the deficit will swell, he said.

Wall Street Journal

Ahead of the Tape

October 6, 2006

Temporary help is a leading indicator of broader job trends. Temp jobs started contracting before the economy sank in 2001 and kicked in before employment started growing again.

Lou Crandall, economist at Wrightson ICAP, a bond-research firm, calls them a gauge of corporate energy levels. "When they've got a lot of new projects that ultimately lead to expanded economic activity, [companies] suck up temps," he says. Troublingly, year-over-year growth in temp employment has slowed from more than 6% last year to 2.5% in August, a possible sign of brewing corporate retrenchment.


Fed rate-hike suspension was 'close call'

August 30, 2006

"The pause will last through the end of the year," said Lou Crandall, chief economist at Wrightson ICAP Llc in Jersey City, N.J. "It appears to have been a tight consensus around a close call rather than a split."

Mist News

Fed May Tolerate Faster Inflation as Housing Sags, Growth Slows

August 29, 2006

"When you have a very visible strain in the economy like housing at present, something that probably won''t break but just might, the Fed gives more weight to the potential for exponential losses,''' said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. "A policy shock would be more costly than usual at present."

The Boston Globe

Fed chief hints end of hikes is near

July 20, 2006

Federal Reserve chairman Ben S. Bernanke, laying the groundwork for a pause in interest-rate increases, said policy makers must be wary of lifting borrowing costs too high...The testimony "lists all the reasons why they would pause without saying they are going to," said Lou Crandall, chief economist at Wrightson-ICAP LLC in Jersey City.  "He is willing to let us go into the next meeting genuinely uncertain."

The Wall Street Journal

Fed's Course Seen As Top Concern For U.S. Economy --- With Inflation Resurgent, Growth Easing, Forecasters Fear Rates Will Go Too High

July 5, 2006

The overarching concern: With energy prices high, consumers heavily in debt and the housing market overextended, the U.S. economy could prove susceptible to an unexpected shock. "We're at a point where there are strains, so we're more vulnerable should a shock occur," says Lou Crandall, chief economist at Wrightson ICAP in New York.

The Wall Street Journal Online

Reports Intensify Pressure on Fed to Boost Rates

June 15, 2006

The Fed may conclude it would rather risk more slowing in the economy than allowing the recent rise in inflation to become entrenched. If so, yesterday's reports may have made a decision to raise rates later this month easier, though still unpleasant. Lou Crandall, an economist at Wrightson Associates, a financial-research firm, said Mr. Bernanke may have painted himself into a corner with his hawkish rhetoric, but given the latest inflation number, "it turns out to be a corner they want to be in anyway."

Barbados Advocate

Central banks keep their fingers on rates button

June 12, 2006

An extended period of easy credit around the world encouraged investors to take greater risks, said Louis Crandall, chief economist at New Jersey-based Wrightson ICAP LLC. To a large extent what we're seeing is a normalisation of risk premiums rather than a loss of confidence, Mr Crandall said.

Wall Street Journal Online

Market Beat


The Federal Reserve's uncertainty over whether to give a thumbs-up to another rate increase has been well-reflected by the bets being placed in the federal-funds futures market lately. This morning the July contracts were pricing in roughly a 76% chance that the Fed would approve an increase to 5.25% at its June 28-29 meeting. Just two days ago, they were at 56% -- toss-up territory. And little more than two weeks ago, they were trending toward no increase….

Get used to it, says Lou Crandall, at Wrightson ICAP said. The long reign of certainty, he believes, is over. "The surprise is not that we have a lack of certitude but that it took so long in coming," Mr. Crandall said. "We're back to where the Fed wants us to be… a central bank is never very happy when it can say what it's going to do next -- that's a sign that it recognizes it has unfinished business."


Lacker Says Inflation Makes Rate Pause “Less Likely”

May 18, 2006

The Federal Reserve is less likely to suspend its interest-rate increases after recent reports showed rising inflation, Richmond Fed President Jeffrey Lacker said...

“Lacker’s reading the numbers at face value,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. In Lacker’s view, “No matter how much you want to take a nuanced apporach, the whole point of a clear strategy is not nuance.”


Fed Faces “Credibility Test” in Deciding on June Move

May 11, 2006

The yield on the July federal funds contract yesterday indicated traders see a 40 percent chance of a quarter-point increase at the Fed’s June 29 meeting, from 38 percent on May 9.

“The Fed wants to make sure that it does not give the market any opportunity to find guidance in the statement where none was intended,” Louis Crandall, chief economist at Wrightson ICAP LLC in New York. “Greater clarity might have been inappropriate.”

Dow Jones Newswires

Asian Agency Buyers Scrutinized Ahead Of Forex Report

May 10, 2006

China has ramped up its buying of agencies and mortgage-backed securities guaranteed by Fannie and Freddie Mac in recent years in an effort to invest their mammoth currency reserves. China's reserves hit $875.1 billion as of March, making them the largest in the world.

Lou Crandall, chief economist at research firm Wrightson ICAP in Jersey City, estimates that China's portfolio could total as much as $250 billion now, evenly split among agency debt and mortgage-backeds.

Reuters News

Bernanke expected to say data will drive Fed

April 25, 2006

"The Fed's prediction is that economic developments will allow it to pause soon, but it doesn't actually know," economist Lou Crandall of Wrightson ICAP wrote to clients.

"Chairman Bernanke has no objection if the market also concludes that the Fed will pause soon, but he'll want to make it clear that the Fed has made no actual commitment to stop," he said.


Debt Ceiling Debate Fuels Demand for 2-Yr Treasuries

March 15, 2006

The Treasury last postponed an auction because of a failure to lift the debt ceiling on June 28, 2002, said Louis Crandall, chief economist at Wrightson ICAP, a Jersey City, New Jersey-based research firm specializing in Treasury finance. The government sold$27 billion of two-year notes less than 24 hours after Congress passed legislation lifting the debt ceiling.

“That was the closest they have come to creating a serious disruption in the auction process since the mid-1990s train wreck,” in which congressional refusal to lift the ceiling forced a 21-day federal government shutdown, Crandall said.

Associated Press

Rising Bond Yields Can Have Adverse Impact

March 10, 2006

"The pension system, collectively, has been just slammed on the low yields," said Lou Crandall, chief economist for Wrightson ICAP, a bond market research firm in Jersey City, N.J.

While he emphasized that other issues have hurt pension funds, "part of the problem has been underfunding and part of the reason for underfunding is that pension fund managers thought they were in a better position they really were."

Dow Jones Newswires

Without Debt Hike, US Tsy Auction Snarls Seen Late March

March 8, 2006

Congress's need to increase the government borrowing authority every one or two years spotlights the massive public debt, as well as partisan differences over budget priorities. But raising the debt limit has less to do with future budgets than it does with accounting for past spending and the growing obligation for Social Security and other entitlement programs.

"Once every couple of years (lawmakers) have got to eat their spinach, and that might be a good thing," Crandall said.


Treasury Rally on Rate Boost May Spur More Increases

December 13, 2005

Removing the word “accomodation” won’t signal the Fed is approaching the end of its rate increases, some strategists said. One reason is that mortgage rates and consumer and business borrowing costs, which are based on the 10-year Treasury yield, are lower now than when the Fed’s Federal Open Market Committee started lifting its benchmark rate.

“If a change in the wording of the FOMC’s policy statement were to drive bond yields and mortgage rates down now, the resulting economic stimulus would heighten the already considerable risk that the fed funds target will have to raise above 5 percent later in 2006,” Louis Crandall, chief economist at Wrightson ICAP LLC, said yesterday


Wrightson’s Crandall Comments on Fed Discontinuing Data on M3

November 10, 2005

“M3 had never been a key indicator in the US. The M2 was generally the feature of money aggregate in recent years,” Crandall said. “People tend to focus on M2.”“M3 has provided little information about the direction of the economy over the past decades. Some of the data it includes is more approximate than those in M2. The Fed feels less need” to publicize the M3 data.

The New York Times


November 6, 2005

In 1987, only two months into the job, Greenspan faced a daunting hurdle to managing expectations -- a stock-market crash. The next morning he issued a terse statement proclaiming the readiness of the Fed to ''provide liquidity.'' Lou Crandall, chief economist of Wrightson ICAP, a bond market research firm, says he wondered: ''Yeah? Like how?'' No less than inflation, ''liquidity is a state of mind,'' according to Crandall. ''Once it is lost, the Fed has no magic wand to bring it back.''

The Wall Street Journal

Treasury May Boost Debt Sales Next Year Amid Wider Deficit

November 1, 2005

"Coupon sizes will remain at their current low levels through the end of the year, but then the combination of a slightly larger borrowing requirement and a sharply increased level of maturing debt that needs to be rolled over will require large sustained increases in all offering sizes in 2006," said Lou Crandall, chief economist at Wrightson ICAP.

The Wall Street Journal

Oil Money Funnels Into Treasurys --- Foreign Petrodollars' Move Into Long-Term U.S. Bonds May Keep Borrowing Cheap

September 30, 2005

Exactly how much money the world's oil producers are funneling into the U.S. is open to speculation since the data on foreign funds coming into the country are limited.

"They are difficult to isolate," said Lou Crandall, economist at Wrightson ICAP in Jersey City. But with oil revenues increasing $300 billion with every $10-per-barrel price increase, he said funds piling up in petrol-soaked nations are "definitely" having an impact on rates in the U.S.

It is worth noting that a good portion of the money is also absorbed by local economies and is used to pay off debt, as well. But when oil producers are investing in fixed income, they "are purchasers of the long end," said Mr. Crandall. "As the money piles up in the short run, it's not unlikely that a lot of it is in fixed income."

Dow Jones Newswires

US Tsy Seen Using Shorter-Term Debt For Katrina Costs

September 16, 2005

In a research note this week, Lou Crandall, chief economist at Wrightson ICAP, projected that with recovery spending spread over several years, the impact on Treasury borrowing is unlikely to rise above $20 billion per quarter.

"We expect the fourth quarter (of the 2005 calendar year) to be a peak period for hurricane impacts, with the combined total of direct and indirect effects reaching $20 billion or so," Crandall said.

Having paid down its short-term bills so far this year, Treasury could finance the entire additional cost for the hurricane recovery next quarter through bills and still have fewer bills outstanding than at the end of 2004, he said.

Wall Street Journal Online

Trading Shots: The Fed After Alan Greenspan

August 12, 2005

Some think the Fed should clearly communicate its concerns about asset prices to the public so investors and consumers can be forewarned. Full transcripts (which are published on a five-year lag) from 1999 Fed meetings show candid thoughts on the markets, including some concerns about a bubble. "In a world where you have leverage increasing exponentially, across products we hadn't even imagined, the role of the central bank as steward for those markets is going to be increasingly a topic of debate," says Lou Crandall of Wrightson Associates. Other central banks look more for financial market "stress points," he said, whereas "the Fed has been very reluctant to embrace that view."


Treasury Survey Could Weaken TIC's Bite

April 22, 2005

A survey coming out this week could soften the blow of the Treasury International Capital data, which has caused volatility in the Treasury market on fears foreign interest in U.S. securities is waning. The preliminary results of the annual survey, to be finalized in June, may show TIC data underestimates purchases of Treasuries, according to Lou Crandall, chief economist at Wrightson ICAP. "If the market knows the TIC data has been underestimating purchases of Treasuries by $5-10 billion each month, then [market participants] will have a better idea of what to expect," he said.

The 2004 survey is especially anticipated as it covers a year of explosive build-up of foreign currency reserves. Crandall declined to speculate how much of an impact the changing view of TIC data could have on bond yields.

The survey's final results may also show foreign buyers are diversifying their maturities. "Foreign buyers have been going further out along the curve to pick up yield," Crandall noted. The survey may show holdings, normally concentrated in the one-to-two-year sector, could spread to the five-to-10-year bucket, he said.

Toronto Globe and Mail

Wall St. windfall unlikely in social security changes; Plan said for retirees' benefit, not firms'

January 13, 2005

While equity prices and corporate bond prices could rise with the introduction of personal savings accounts, analysts warn that the government's own cost of borrowing could rise because it would have to issue an additional $100-billion to $150-billion in Treasury bills to make up for the funding shortfall.

However, Lou Crandall, chief economist with Wrightson ICAP LLC, a bond market research firm, said forecasts of dramatic medium-term impacts on financial markets are overblown because they are based on projections of high levels of participation in the voluntary plan.

“Inertia and fear will keep a lot of people from participating,” he said.

Bloomberg News

Fed to Raise Benchmark Interest Rate, Survey Shows

November 11, 2004

Investors have come to interpret ``measured'' to mean the Fed will raise rates at each meeting, said Louis Crandall, chief economist at Wrightson ICAP LLC. "It is interesting that measured was seen as a promise to move slowly. Now it has come to take on the 'relentless' overtone. I think they might be able to find ways to go back to that earlier meaning.''


Interest rates expected to rise

November 9, 2004

"Friday's employment report suggested that economic conditions at the beginning of the fourth quarter were stronger and more balanced than expected," said Lou Crandall, chief economist for Wrightson ICAP, a Wall Street research firm, "which means the economy is better equipped to weather any head winds generated by the energy price increases that we have already seen," he said.

Securities Industry News

Fail-Safe Sought as Spike Strikes Bonds

September 20, 2004

"When markets behave radically different from the way you think they're supposed to, it just shows that there are dynamics of the market that are not well understood, and that the market structure needs to be reexamined," said Lou Crandall, an economist at Wrightson ICAP. Crandall was one of the first to write about the possibility of settlement failures under an aggressive monetary policy. Most-including Crandall-considered large rate-oriented fails a highly unlikely outcome.

"The fact that we didn't anticipate this happening in this environment is a sign that the market structures are less robust than we thought," Crandall added. "Fears can be self-fulfilling. People don't want to get into the middle of these problems, which means lenders may choose not to make their securities available to the market."

Financial Times

Brighter outlook gives a boost to Treasury yields

September 4, 2004

Still, economists warn that while the August jobs report met expectations and made up for the weakness of the previous two months' reports, it was not strong enough to completely erase fears of an extended "soft patch."

"You'd like to see more (payroll gains) at this point in the economic cycle," said Lou Crandall, chief economist at research firm Wrightson ICAP, adding he perceived last month's payroll growth as "mediocre".

Meanwhile, one good month of data does not make a trend.

Payroll figures have been volatile this year, with economists more often than not finding their forecasts at odds with the reported data.

The reported change in non-farm payrolls has been outside of the market forecast range in six of the past eight months - in contrast with the previous two years, when payrolls were within the forecast range 90 per cent of the time, according to Wrightson ICAP.

Bloomberg News

Fed Likely to Lift Rates Over a Year, History Shows

June 30, 2004

Fed policy makers are reiterating a pledge to boost rates at a pace likely to be ``measured,'' and said they'll respond to changes in economic prospects as needed.

“The Fed can take a gradualist approach to raising the funds rate'' because inflation is low, said Louis Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. He expects the fed funds rate to rise by 3 percentage points or more.

“The process will take at least 18 months and possibly two years or more, depending on the performance of inflation and the economy over that period,'' he said.


US prices rising, but not like in the era of disco.

June 14, 2004

[O]ther measures of core inflation, which Fed officials prefer, are not running nearly as hot as the widely watched Consumer Price Index.

"We traditionally think of inflation as something that has a lot of momentum and persistence. Fed officials are saying: 'That's not what we have right now,’ and given the current economic environment, I think they're right," said Lou Crandall, chief economist at Wrightson ICAP.

New York Times

Greenspan outlook raises fears of higher U.S. rates

April 22, 2004

To the apparent disappointment of investors, Greenspan paid no lip service on Tuesday to the idea of being patient and said the economy appeared to have undergone a change in the last number of weeks.

The Fed chairman also told lawmakers that banks were generally well positioned to manage an increase in interest rates. The industry appears to have been sufficiently mindful of interest rate cycles and to have exposed itself to undue risks, he said…

The market was caught off guard by Greenspan's comments, said Lou Crandall, chief economist at Wrightson ICAP, a bond-market research firm in New York. There had been some hope in the market that Greenspan would suggest the sell-off in Treasuries had been overdone. Instead, “he chose to say that things had changed in the past few weeks. He just snatched away the hope that he was going to be more friendly.”

Wall Street Journal

Budget Deficit Was $72.7 Billion for March

April 14, 2004

The March budget figures, released yesterday, show that this year's deficit remains on track to surpass last year's record $374 billion. For the first half of fiscal 2004, which began Oct. 1, the budget deficit was $299.47 billion, broadly in line with Congressional Budget Office forecasts.

The administration has forecast a deficit of about $521 billion for fiscal 2004, but some private-sector forecasts predict less red ink. "We expect the median estimate to be much closer to $400 billion than $500 billion by the time the month is over," said Lou Crandall, chief economist at Wrightson ICAP.

Financial Times

Dollar decline worries investors: But renewed interest in Treasuries from private foreign buyers has helped to allay their fears

January 23, 2004

Wrightson ICAP, an independent research firm, estimates that private investors acquired a net Dollars 57bn of Treasuries in the third quarter of 2003, compared with a net Dollars 19bn of purchases by foreign official and international institutions.

Over the long term, foreign demand for US assets such as Treasury securities, corporate bonds - the so-called "agency" debt issued by mortgage finance providers Freddie Mac and Fannie Mae - and equities has been strong, rising from less than Dollars 20bn per month in the early 1990s to more than Dollars 60bn in the early years of the 21st century, according to Wrightson.

Economists say that the continuation of private foreign investment, following the short-lived selling in September and October that followed a G7 communique implying acceptance of a weaker dollar, shows that investors still have faith in the US economy, in spite of the dollar's descent.

"Foreign investors have remained willing to retain their exposure to the US economy," says Lou Crandall, chief economist at Wrightson, while adding that investors have hedged their exchange-rate risk.

Securities Industry News

Players Seek Greater Fed Role in Guvvie Fails

December 15, 2003

The Treasury Department has in the past allowed the Fed to roll some maturing securities into a special certificate tailored to mature on a specific date at times when debt ceiling limits are reached to avoid "accidental" disinvestments in the Fed's portfolio, said Lou Crandall, chief economist at Wrightson ICAP LLC.

Crandall, one of the experts that predicted the possibility of structural failures in the usually liquid financing market given historically low rates, said the primary challenge will be convincing the Fed to alter the philosophical tenet behind its securities lending program to "a limited but consistent" versus "secondary and temporary" liquidity backstop for the financing market.

"That would require a significant philosophical change, but it's one that I think should still be considered," he said. "It was an issue widely discussed on the Street ahead of time and I'm sure it was debated within the Fed, too. In the end, the Fed did not take that opportunity, but the opportunity was there."

Financial Times

Profit-taking hits Treasuries GOVERNMENT BONDS

December 9, 2003

Most economists believe that the Fed will keep its funds rate at 1 per cent for the majority of 2004 to avoid any risk of dis-inflation, despite a surprisingly weak employment report on Friday.

"Fed officials have said on any number of occasions - using all sorts of different language - that they intend to be more patient in responding to this economic recovery than they have been in past cycles," said economists at Wrightson ICAP.


Futures Shock

December 8, 2003

The worse-than-expected gains in employment helped drive the fed fund futures contract for April to 1.06% Friday from 1.15% the day before. But even at 1.06%, the futures market still seems to be making it one chance in four of a 25-basis-point (0.25 percentage point) rate hike at the Federal Open Market Committee's March 16 meeting. Could that be true?

Most analysts say yes, but since most believe the FOMC will probably leave the fed funds rate alone, they prefer to dismiss that 1.06% as just another market error. Wrightson ICAP's chief economist, Louis Crandall, the most thoughtful money-market analyst I know, is rather more respectful, believing a price is usually trying to tell us something, if only we'll listen.

Now comes the twist. Crandall doesn't interpret the April quote to be a pure market forecast of a rate increase. Rather, he thinks it is merely confirming what most economists should know: The fed funds rate of 1% is far below the market's "equilibrium" level; at 1%, the eagerness to borrow far exceeds the willingness to lend. Somebody has to step in to plug the gap between the heavy demand for credit at these levels and the more limited supply. In the overnight market, banks see little risk in playing that role, because they know the Fed is -- for now, at least -- pegging their cost of funds.

But at even slightly longer maturities, the financial markets have to take on interest-rate risk to meet the demand for funding. And to accept the interest-rate risk involved in bridging the gap between the heavy demand for funds and the light supply at today's artificially low "prices," banks must expect to be rewarded with higher rates.

The Wall Street Journal

U.S. Manufacturers Are Starting to See Reason for Optimism

November 17, 2003

TO BE SURE, there are shortcomings in PMI indexes. They don't gauge the degree to which conditions are actually changing, for instance, so a large number of companies saying things are just faintly better can spike an index. In the case of the U.S., the index is clearly being boosted by a snapback from a very low level of manufacturing activity. The monthly PMI numbers are also prone to fluctuate, especially in smaller countries. And there isn't any index at all for key industrial countries like China or South Korea.

"But the one rule you learn is to never ignore what it's telling you," says Lou Crandall, chief economist at Wrightson ICAP LLC, "because it generally is right about the momentum in the factory sector."

And at the moment, it's clearly pointing to an accelerating upturn, not just in the U.S. but around the globe. The global manufacturing PMI -- tallied from those national PMIs by J.P. Morgan and NTC Research, a business-survey firm, with the help of purchasing associations around the world -- jumped last month to its highest level in more than three years, rising 2.2 points to 54.5, the fourth consecutive month in which the index pointed to expansion. A reading above 50 indicates expansion; a reading below 50 indicates contraction.

The Wall Street Journal

Treasury to Sell $57 Billion in Notes --- Refunding to Be Smaller Than Wall Street Expected; No Return of 30-Year Bond

November 6, 2003

"The financing changes that Treasury has already put in place this year have created the capacity to accommodate the increase in issuance," said Brian Roseboro, acting Treasury undersecretary for domestic finance.

Wall Street had expected a $61 billion refunding package. "The bottom line is Treasury feels no urgency at all about expanding the scope of its borrowing operations," said Lou Crandall, chief economist at Wrightson ICAP. Treasury sold a record $60 billion at its August refunding.

The Wall Street Journal

Treasury May Expand TIPS Options --- Inflation-Indexed Securities Are Catching On, and U.S. Aims at Borrowing Portfolio

October 24, 2003

WASHINGTON -- The U.S. Treasury may add another maturity of inflation-indexed securities, commonly known as TIPS, to its borrowing portfolio, it said, while asking bond dealers for advice on how to expand that market sector.

"Total TIPS issuance has expanded enough over the past year to comfortably accommodate more than one maturity point," said Lou Crandall, chief economist at Wrightson ICAP.

But analysts don't expect Treasury to roll out another maturity of TIPS until the middle of next year.

Chicago Tribune

Bond fund investors have some reasons to be wary

October 21, 2003

Some Wall Street pros say that investors in Treasury issues and other high-quality bonds should get used to disappointment. If the economy is on a sustained growth track, they say, then it's more logical to assume that interest rates will be higher a year from now, not lower.

"The underlying direction of interest rates is pointing up," warned Lou Crandall, an economist at Wrightson ICAP, a New York-based economic research firm.

Securities Industry News

Industry Learns From Treasury Note Fails

October 20, 2003

In the wake of the recent, unprecedented settlement failures involving the May 10-year Treasury note, the Securities and Exchange Commission is preparing a letter addressing the issue, a source said.

The BMA continued last week to help formalize agreements between counterparties to resolve problems and maintain liquidity in what is typically the most liquid of trading sectors, which froze uncharacteristically on the 10-year May issue after huge amounts of short-selling proved unsustainable under the low rates set by the Federal Reserve. Firms had calculated that it was less costly to let trades fail than to let go of or lend out the securities at 45-year lows, sources said.

The low rates stymied the typically brisk cash repo market, which fuels funds management for the overall financial system-a consequence called "structural risk" by an analyst at Wrightson ICAP, who wrote about its potential over a year ago, regarding systemic impacts on the bond market from the decision to take interest rates down to near the lowest levels in history.

Dow Jones Asian Equities Report

FOREX VIEW: For US Bonds, Asia Forex Policies Good Thing

October 16, 2003

Put simply, the large central banks in Asia, who between them control the lion's share of global dollar reserves, have had a growing love affair with U.S. fixed income markets. Their purchases of Treasury and agency debt have helped keep interest rates at historic lows and credit flowing to U.S. consumers, who in turn have been a big source of strength for an otherwise struggling economy over the last few years.

In this sense, pushing Asian governments to allow their currencies to float freely carries considerable risks that are very much on the radar screen of the U.S. government bond market at a time when it already faces considerable pressure from an improving economic outlook.

"It is the biggest single issue that people talk about every single day," said Lou Crandall, economist at ICAP Wrightson in Jersey City, who said the scale of purchases from Asia, particularly Japan "is like nothing we've seen before."

The Wall Street Journal

Projected Budget Deficit Narrows Due to Strengthening Economy

October 9, 2003

Analysts warned against reading too much into the improving budget picture, however, saying it could prove to be short-lived. Currently, the deficit is projected to reach as much as $500 billion for fiscal 2004, when the budget effects of Mr. Bush's tax cuts and the extra spending on the Pentagon and homeland security are likely to peak.

But economists said the latest developments suggest that the deterioration of the government's fiscal situation has begun to ease. Rising profits are leading the way by pushing up corporate-tax collections. Lou Crandall, chief economist at Wrightson ICAP, estimated that corporate tax receipts would total $40 billion in September, a $5 billion improvement from September 2002, if it weren't for a one-time budget gimmick in the 2003 tax-cut bill that shifts some of that revenue into October. Tax withholding from paychecks also is showing some improvement, in a possible reflection of job gains.

New York Times

Strong Dollar, Weak Dollar: Anyone Have a Scorecard?

September 24, 2003

Lou Crandall, chief economist at Wrightson ICAP, a publisher of financial newsletters, noted that China did not even participate in the Group of 7 meeting and that Japan quickly played down expectations of a change in policy.

"What we have is a somewhat wishful statement from the Group of 7, when six of the seven are already committed to flexible exchange rates," Mr. Crandall said. "Only one of the targeted nations had a seat at the table, and that nation politely dissented in statements after the meeting."

Dow Jones Newswires

POINT OF VIEW: Fed Buys Time And Calms Markets, For Now

August 13, 2003

The risk inherent in this latest and so far warmly received clarification is that it could limit the Fed's options down the line, once it feels the "considerable period" is nearing its sunset and it's time to adopt a more balanced assessment. Just as this recovery feels uncertain, managing the economy toward the long-anticipated turnaround may require more of the same kind of subtle monetary policy management the Fed has been conducting with words as much as with actual interest rate cuts.

At that point, when the Fed feels the economy is at last moving to sustainable growth, it will have to essentially warn the markets that it's close to a policy change by removing the "considerable period" clause.

 "This sets up a volatile situation for later this year or early next year," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, N.J. "That final clause will have to be removed from the statement at some point before the Fed is actually ready to tighten, and the money market yield curve will steepen sharply when that happens."


Losing Confidence: The market questions its ability to interpret the Fed

August 11, 2003

The Federal Open Market Committee, the central bank's policy-setting panel, meets Tuesday, and many investors will be tuned in. Well, maybe.

 "The bond market and the Fed aren't talking to each other," asserts Lou Crandall, chief economist at Wrightson ICAP in New York. "Rather than kiss and make up, it's a cooling-off period."

While virtually no one expects the FOMC to cut interest rates this week, because recent data point to a revival in economic activity, Crandall expects the central bank to "definitely play it straight" in its accompanying statement.

New York Times

Savage Sell-Off in Bonds as Treasury Yield Continues Rise 

July 22, 2003

Some contend that interest rates probably fell much further than they should have after Federal Reserve policy makers warned in May that they were worried about the threat of deflation, though they said the possibility was very slim. 

''I think it is reasonable to view the real aberration as the drop in bond yields from May to mid-June rather than the sell-off here,'' said Louis Crandall, chief economist at Wrightson ICAP, a research firm. 

He also contended that the 10-year yield, which has a big influence on mortgage rates, would have to move much closer to 5 percent to become a threat to the economy. 

Wall Street Journal

Enterprise: Small Economic Engines May Not Be Enough --- Hopes for Recovery in U.S. Are Pinned on Small Firms, But Can They Handle It?

June 17, 2003

THE NATION'S SMALLER companies -- agile, optimistic, battle-tested after three years of a sluggish business climate -- are being counted on to lead the economy out of its doldrums. But sweeping changes over the past decade may delay the hoped-for revival and also reduce the leadership role that small business plays in the eventual recovery.

Economic statistics have a hard time capturing what's occurring in the little machine shops, direct-mail firms and other small companies around the U.S. But two trends -- the increasing inability to raise prices, and the overcapacity that developed in many industries during the go-go 1990s -- could hold things back.

"We never quite know what's happening with small business," says Lou Crandall, chief economist at Wrightson ICAP LLC, a New York bond-market research firm.  Mr. Crandall believes we're at the beginning of a more robust recovery -- but he also thinks that smaller companies will play a smaller role in that recovery than many expect.

Small firms tend to be less indebted, so they're getting less direct benefit from low interest rates, Mr. Crandall says, while larger, more-leveraged concerns are enjoying a huge boost to cash flow because they have lower interest payments. Less international, small firms also benefit less from the dollar's recent decline than big firms that get to turn foreign profits into dollars at more favorable exchange rates.

Associated Press

ALL BUSINESS: Greenspan speaks, Wall Street decides?

June 14, 2003

Sometimes it just takes a single word out of Alan Greenspan's mouth to convince Wall Street of the Federal Reserve's next move.

 Just look at what's happened in the last week: Greenspan mentions that the Fed may take out "insurance" to prevent economic weakness and deflationary pressures. Financial markets translate that to mean another cut in interest rates is imminent.

 But is that what Greenspan meant? It might not matter.

 "If market expectations of a rate cut become sufficiently well-entrenched, the Fed will have little choice but to deliver," Louis Crandall, chief economist of Wrightson ICAP, wrote in a report to the firm's clients this week.

Investment Week

Deflation concerns overstated

June 9, 2003

Not that market-based indicators are signaling deflation. To the contrary, a falling dollar, a steep yield curve, narrowing credit spreads and a rising stock market are all inconsistent with a forecast of deflation.

What's more, the spread between nominal and inflation-indexed Treasuries is forecasting low inflation, not deflation, of 1.7% over the next 10 years. The rally in the Treasury market, which took yields to 45-year lows, 'is not being driven by fears of deflation but by the perception that central bankers' awareness of the cost of deflation has altered the likely course of policy in the coming quarters,' says Lou Crandall, chief economist at Wrightson ICAP.

Dow Jones Newswires

FED WATCH: Greenspan Gives Rorschach Test To The Markets

June 2, 2003

If anything, a wide spectrum of veteran Fed watchers said Greenspan's testimony was one of the more difficult to interpret in recent memory, leading to a diversity of opinion.

Lou Crandall, chief economist at Wrightson ICAP, reckons Greenspan's testimony in no way opened the door toward another interest rate cut. "He still thinks his bet will pay off and growth will turn around," which suggests the funds rate should stay at 1.25%.

 The problem is "this turned out to be one of those Rorschach speeches," Crandall said, referring to the infamous psychological ink blot tests. "Everybody's seeing in it what they want to see," he said.



May 12, 2003

While Greenspan doesn't enjoy the same mythic status in the markets that he did during the Roaring '90s, his credibility as an inflation-fighting monetary manager remains high. At least initially, Wall Street won't have the same confidence and comfort level with his successor -- no matter who it is. ``His replacement's performance will be judged less generously by the markets,'' says Louis Crandall, chief economist at Wall Street consultants Wrightson ICAP LLC.

Houston Chronicle

Fed shifts to rooting for a little inflation 

May 11, 2003

In fact, Fed Chairman Alan Greenspan and his predecessor, Paul Volcker, have embraced the concept of price stability, where consumers and businesses don't consider prices in their decision- making. Economists say that happens when inflation trends at about 2 percent. 

But the Fed's favored inflation gauge, the price index of personal consumption expenditures, came in at an annualized rate of 0.9 percent in the first quarter. 

"The Fed thinks that the current inflation rate is as low as you can comfortably go, and it would like it higher," said Lou Crandall, chief economist of Wrightson ICAP. 

The Washington Post

Stocks Bounce Back After Early Plunge; Earnings News Lifts Tech Firms

May 2, 2003

 But some analysts warned that much of the earnings improvement is due to cost cutting and not increased sales. Economists also point to the disappointing jobless-claims numbers. They said when weekly claims numbers are greater than 400,000, it means the economy is still too weak to create jobs.

 "It's not just a question of how strong the turnaround is but when it starts," said Louis Crandall, chief economist for Wrightson ICAP, a bond market research firm. "Literally every additional week that the economy remains in a deep-freeze increases the risk of a negative GDP growth rate in the second quarter that would translate directly into a pause in the earnings recovery."

 This quarter is starting off on a "very weak foot," Crandall added.

Press Profiles


Eye on the Fed: Money-market guru views rates, rebates and the economy's course
An Interview With Lou Crandall

May 14, 2001

While he's hardly a household name, when I think "Fed-watcher" or even "money-market economist," I always think Crandall. From his perch as chief economist at the New York-based consulting firm Wrightson Associates, the 42-year-old iconoclast turns out a steady stream of common-sense commentary, including his weekly Money Market Observer, which is must-reading for the bond markets. After receiving his degree from Cornell in 1980, he took a research position at the Federal Reserve Bank of New York, where he participated in the monetary-policy process as a reserve forecaster. His tenure at the Fed coincided with the brief period when the central bank did target reserves (instead of the interest rate on federal funds), experience Crandall now deems invaluable…

Bloomberg Markets Magazine

Crandall as Most Accurate Forecaster Says This Too Shall Pass

December 2, 2010

Crandall is No. 1 among forecasters for the two-year period ended on Sept. 30, according to data compiled by Bloomberg. He ranks second for his projections of movements in the consumer price index and fourth in predicting sales of existing homes.

Crandall gained his top ranking by accurately predicting, month by month, U.S. progress toward weathering the recession and returning to growth. He doesn't think the administration of President Barack Obama, or a new Republican-controlled House of Representatives, can speed up the process.

"The recovery is going to continue to be painfully slow, but there is not much that the government can do about that," Crandall says. "Some progress is being made, but it is from such dismal levels that we have not yet re-established a sense that things are moving in the right direction."

Testimonials That Even Made Us Blush

PIMCO Investments

Paul McCulley, Managing Director

“Lou Crandall and his team are the most used and least cited analysts on Wall Street. Lou is the unquestioned Michael Jordan of federal debt projections; he plays the game, week in and week out, at a level that no other Street economist has ever remotely reached. While most wouldn't admit it, no chief economist at one of the major houses would even think of issuing a forecast of Treasury activity without privately benchmarking it against Wrightson. Lou's detailed analysis and forecasting of the whole range of high frequency forecasts is also highly valued; there's nobody better at separating noise from information in the data. When I was Chief Economist for the Americas for UBS, I paid to read Wrightson, even though the firm was ostensibly a competitor. Now that I'm head of the Short-term Desk here at PIMCO, I still pay to read Lou and value his work even more.”

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