Press Clippings

MarketWatch

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.

Reuters

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."

Reuters

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.

Bloomberg

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."

Bloomberg

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."

Reuters

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.

Bloomberg

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.

Bloomberg

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."

MarketWatch

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.

Bloomberg

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.

Bloomberg

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.

Reuters

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."

MarketWatch

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.

Bloomberg

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."

Reuters

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.

NPR

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."

Bloomberg

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."

Bloomberg

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."

Bloomberg

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.

FT.com

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%."

Reuters

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.

Reuters

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.

Newsday

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

June

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."

Bloomberg

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.”

Bloomberg

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.

Bloomberg

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.

Bloomberg

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

Bloomberg

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

Reserved

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."

BondWeek

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.''

Newsday

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.

Reuters

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.

Barron’s

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."

Barron’s

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 m