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Articles by Brian Romanchuk
Comments On U.S. Mortgage Hedging
I ran into some discussions about “doom loops” involving mortgage hedging in the USD rates market. I am quite distant from current market conditions, so I cannot give market advice, nor am I completely on top of the current dynamics. Instead, this article gives a background explanation why mortgage hedging causes difficulties in USD rates markets.
Mortgage Rate Pain
President Trump’s relentless warfighting against price stability has finally paid dividends: conventional 30-year mortgage rates have breached 7% (figure above). We have been at similar levels in the aftermath of the 2020’s Bond Catastrophe, but the chart looks ugly and there is no sign of an end to policies that are designed to raise prices.
Back On Forward Guidance
I ran into a couple of interesting articles, and wanted to comment on them. The first is about forward guidance, the second is about a potential American diesel export ban. The first article is “When central banks say nothing at all” by Stefan Gerlach. I will discuss the article after I do a review on forward guidance. I have written multiple times about this topic, but I was trying to be brief and skipped over the background.
Who's The Spread Product Now?
Sep 04, 2026, 3:05 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary One of the points that is coming up in my news flow is the simultaneous rise in bond yields. The interesting thing to long-time Canadian market watchers is that the U.S. yields are higher. Modelling Canadian bonds as a spread to Treasurys would make sense in a gold standard system.
Labor Force Participation Rate Drop Not That Big A Deal
Aug 12, 2026, 10:20 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary The 10-year U.S. Treasury yield has been drifting higher, although it remains within a broad range that it settled into after the post-COVID Bond Apocalypse. The recent labour market data coming out of the United States has not been great.
Belated Comments On The AI Boom
May 22, 2026, 3:35 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary Fixed investment in information technology equipment and software as a percentage of GDP (ends in 2026Q1) in the last two quarters of data saw a surge of about 0.4% of GDP. From a quick survey of publicly available research, there are arguments that the AI boom added 1% to American GDP growth.
Canadian Inflation Comments
Apr 20, 2026, 11:25 PM ET, , , Summary So far, the gasoline price shock in Canada has not been as bad as what happened after the pandemic, but I am not incredibly optimistic about the medium-term outlook. The Canadian CPI numbers for March were released today, and core inflation remains stuck at a level above the 2% target. It is clear that regions that are dependent upon the commodity flows from the Gulf are going to be hit hard.
Secular Employment Shifts
Brian Romanchuk 718 Followers Comments Summary The Payrolls Employment Report in the United States released earlier this week was stronger than expected. The weight of manufacturing employment has been plummeting for some time. The demise of the importance of the domestic manufacturing sector helps insulate the economy from the manufacturing fixed and inventory investment cycles.
Fed Balance Sheet Unwinding
717 Followers Comments Summary Back in ye olde days (pre-2008 in the United States), central bankers had not gone nuts with QE and so reserve balances were held at the minimum required. The act of purchasing bonds by the central bank creates deposits (“money”) at the central bank that cannot be removed by (sensible) private sector transactions, so the balance sheet increases.
'Sell The Dollar': Think Price, Not Flows
717 Followers Comments Summary My simplistic input on the topic is that people need to stop thinking about 'global rebalancing' in terms of flows; price changes can do the job. My guess is that the focus on flows draws from the experience of developing markets, with countries with less developed financial sectors.
Canada's Inflation And Debt Levels
717 Followers Comments Summary Canadian CPI data came out today, and the general trend is that it is bouncing around “normal levels” for an expansion. Grocery prices have been trending higher on a year-over-year basis (4%) since a low in April. I like looking at nonfinancial business credit data as a coincident indicator for recessions. Getty Images Canadian CPI data came out today, and the general trend is that it is bouncing around “normal levels” for an expansion.
Principles Of Bond Yields And Credit Quality
Sep. 17, 2025 10:00 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary Commentators are going back to their old habit of comparing the raw yields on 10-year bonds and making assertions about what this means about implied credit quality. The “easiest” way to get a hedged exposure to a foreign bond without taking currency risk is to borrow short-term in that currency, and buy that bond.
Inflation: Watching Paint Dry
Sep. 11, 2025 2:25 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary A weak August PPI report on Wednesday continues the narrative that inflation in the United States is a nothingburger. The inflation risk from tariffs is a “one-off price level shift” that creates some second-order effects.
Canadian Yield Curve Suggests Mediocre Growth, Mild Rate Cuts
Jul. 25, 2025 2:45 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary Although the Canadian bond bears had some excitement a few years ago, the recent experience has been quite subdued despite a certain amount of macroeconomic fireworks. The economy faces weakness due to a certain someone south of the border hammering out tariff rate posts, but the weakness is somewhat manageable, and possibly only mild cuts are needed.
U.S. Treasury Yield Curve And Policy Rates
Jul. 01, 2025 5:35 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary The current situation is somewhat unusual in that the 3-month/2-year slope is mildly inverted, while the 2-/10-year slope is mildly positive. One concern with using the 3-month rate is that it is very tightly locked to the administered overnight rate, and so it cannot be described as true “market” rate in this context.
U.S. Treasury Curve Comment
Jul. 01, 2025 5:35 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary The current situation is somewhat unusual in that the 3-month/2-year slope is mildly inverted, while the 2-/10-year slope is mildly positive. One concern with using the 3-month rate is that it is very tightly locked to the administered overnight rate, and so it cannot be described as true “market” rate in this context.
Trump Trade 'Deals'
May 06, 2025 10:25 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary Recent comments by Donald Trump seemed to confirm what he implied in his earlier remarks: the “90 trade deals in 90 days” he promised generally did not refer to formal trade treaties.
Whither Treasury Yields?
Apr. 22, 2025 3:36 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary The bond market is caught between two contradictory forces: some investors want to get out of U.S. dollar-denominated securities, while the U.S. economy is careening towards recession. I have not seen enough deterioration in activity recession to indicate that the U.S. is in recession now, but the collapse of supply chains is already baked into the cake.
Canada/U.S. Free Trade, R.I.P.
Feb. 03, 2025 3:45 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary Trump has declared economic war on Canada, and has done so in a fashion that Canadians can no longer take the premise of “free trade” seriously.
Oh Noes, Not The Gilt Death Spiral!
Ray Dalio’s musings on rates markets are once again doing the rounds on social media. As anyone who has followed popular rates commentary could guess, he was predicting doom, with the U.K. gilt market being the intended victim this time. This article is a series of my standard rants that I hopefully have not repeated in some time (as a “gift” to new readers).
Yield Curve Indicator Still Waiting For A Recession
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Yield Curve Indicator Still Waiting For A Recession
Jan. 13, 2025 10:35 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary The U.S. 2-/10-year slope inverted in mid-2022, and we are still waiting for the recession that was allegedly predicted by the yield curve.
Canadian Recession Watch
Dec. 09, 2024 1:32 PM ET, , , Summary It seems safe to say that Canada has been seeing sectoral/regional slowdowns, which is not enough to call an economy-wide recession. If we take a longer view of the unemployment rate, it is not much higher than the lows that were seen at the end of previous expansions.
Tariffs: Only Transitory Inflation
Nov. 27, 2024 12:26 PM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary I think that if we do see a large universal tariff hike, it would qualify as 'transitory inflation.' I follow a strict definition of relative price shifts: the overall price level/aggregate inflation rate is unchanged, while different components of the price index go in different directions.
Tariffs As A Fiscal Tool?
Nov. 19, 2024 4:20 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Summary One of the Big Ideas floated by Trump is that income taxes can be replaced by tariffs. I do not see the numbers even getting close to that, even if we put aside the side effects of tariffs on the economy.
TIPS And Drying Paint Original
One of the issues of an interest rate focussed blog is that bond markets can settle into rather uneventful extended range trading dynamics. This has been the case for U.S. inflation-linked bonds, at least from a strategic perspective. That is, given a target fixed income allocation (which depends upon preferences and situation of the investors involved), should we hold inflation-linked or conventional government bonds?
Why The "Friedman Thermostat" Analogy Should Be Uncomfortable For The Mainstream
Nick Rowe’s article on Milton Friedman’s Thermostat has popped up in online conversation. For those of you unfamiliar with it, it is about inferring statistical relationships between inflation and interest rates. Although I agree that it is possible to do some silly correlation analyses between those variables1, if we think about the analogy more carefully, it points to concerns with the mainstream approach.
Q4 Earnings Season Gets Underway With Low Expectations
I got a question about references for post-Keynesian theories of interest rates. My answer to this has a lot of levels, and eventually turns into a rant about modern academia. Since I do not want a good rant to go to waste, I will spell it out here. Long-time readers may have seen portions of this rant before, but my excuse is that I have a lot of new readers.
A Response To A Question About Post-Keynesian Interest Rate Theories (...And A Rant)
I got a question about references for post-Keynesian theories of interest rates. My answer to this has a lot of levels, and eventually turns into a rant about modern academia. Since I do not want a good rant to go to waste, I will spell it out here. Lo... I got a question about references for post-Keynesian theories of interest rates. My answer to this has a lot of levels, and eventually turns into a rant about modern academia. Since I do not want a good rant to go to waste, I will spell it out here.
A Response To A Question About Post-Keynesian Interest Rate Theories (...And A Rant)
I got a question about references for post-Keynesian theories of interest rates. My answer to this has a lot of levels, and eventually turns into a rant about modern academia. Since I do not want a good rant to go to waste, I will spell it out here. Long-time readers may have seen portions of this rant before, but my excuse is that I have a lot of new readers.
A Non-Forecast 2024 Outlook
Since I am not in the forecasting game, I not on top of what the consensus views are. I also no longer pay attention to others’ Year Ahead Forecasts (which tend to be produced in December and long forgotten by February — people seem to produce them solely because it’s traditional). However, I wrapped up my “central banks as banks” article sequence, and I am now going to catch up on some charts to see where we stand.
Central Bank Banking Basics
This article continues the plan outlined in the previous article “Central Banks as Banks.” As I described therein, this is projected to become a chapter within my banking primer. I am not going to describe private banking — as that is the job of other chapters — but I will cover the issues of inter-bank transactions. This article is about fundamentals that we normally do not think about. As the name suggests, central banks are at the centre of the banking system.
2 years after John McAfee's death, widow Janice is broke and needs answers
Two years after John McAfee's death, widow Janice tells Magazine she's penniless and can't move on until his autopsy records are released. Janice McAfee, the widow of tech impresario John McAfee, is still in the midst of grief. She is doing odd jobs to feed herself, has run out of funds, and still doesnt know what really happened to her husband.
Employment-Population Ratio Revisited
Three top tech stocks recommended by Cathie Wood, the chief executive officer of New York-based Ark Investment Management LLC, are climbing. The three top tech stocks recommended by Cathie Wood are key holdings in the ARK Invest flagship fund, Ark Innovation ETF (ARKK), featuring a video streaming company, an innovative electric vehicle manufacturer and a cryptocurrency exchange platform.
No, QE Is Not Costless
I ran across a couple lame attempts at blaming the U.S. Treasury for not extending the duration of issuance during the pandemic low in yields. This is entirely typical for market commentary — going after fiscal policymakers and ignoring the major culprit, which is the central bank. To the extent that the United States has put itself into an awkward macro stabilisation situation with respect to interest rate expenditures, it is the result of the brain trust at the Federal Reserve.
Lung Chip Mimics Radiation Injury
Why Analyst Sentiment Is Your Key to Navigating the Penny Stock Jungle The world of penny stocks is exciting. High risk, high reward, right? But navigating this jungle is not for the faint-hearted. Every day, investors search for the next breakout star, hoping to snag stocks before they soar. But with so many options, how do you choose? Enter the analysts. The Power of Analyst Sentiment in Penny Stocks Analyst sentiment is the collective opinion of market experts on a particular stock's potential.
Inflation Theories
I have been editing sections of my manuscript, and nothing out of that writing output is publishable here (since it is just a rehash of an earlier article). However, I am adding a new section on inflation theories that I will need to think about. This article summarises what I think I will cover. My manuscript is somewhat unusual in that I am mainly discussing the “known properties” of inflation, without offering a theory of inflation.
"Paying For Two Wars"
Comments by Treasury Secretary Yellen and President Biden about “paying for two wars” has attracted some chatter. For example, Adam Tooze just wrote an article on it. As Tooze notes, saying that America is paying for two wars is a particularly bad framing for support for Ukraine and Israel.
The "Economists Monkeying With The CPI" Debate
Note: This is an unedited draft section of my inflation primer manuscript. It is is a chapter about misunderstandings/myths about the CPI. This section aims at claims that economists have fooled around with the methodology to lower the reported inflation numbers. I think one subsection was already published as a draft, but I will leave it in there. At present, I only some overview sections to write, as well as the need to take the axe to a couple sections that ended up overlapping.
Jackson Hole Drive-By Comments
I did a short trip to Lake Placid New York last weekend, and largely missed out on the Jackson Hole central banker discussion. Although some specific speeches have been important for macro debates in the past, I generally view the conference importance as over-rated. Although having an idea what the consensus is discussing is useful, the forward-looking information is limited. In a daily newsletter for Bloomberg, Joe Weisenthal did a summary of some of the topics discussed.
Royal Caribbean Launches Mega Ship, Charts Course For Profit
Royal Caribbean shares surge by 108.72% in 2023, making the stock an S&P 500 performance leader. The company's strong rally began in May after an impressive Q1 earnings report. Analysts expect a return to profitability for Royal Caribbean and other cruise lines. In January, the company is launching Isle of the Seas, which will be the largest cruise ship in service. 5 stocks we like better than Royal Caribbean Cruises Royal Caribbean Cruises Ltd.
The Fed Will Never Hit Its Inflation Target
I ran into a pair of articles about interest rates by neoclassicals. They are straightforward by the standards of neoclassical macro, and cover two topics of interest. The first topic is - how do neoclassicals believe that central banks control inflation? The second is on r* estimates, which are presumably needed in order to use interest rates to control inflation according to the theory.
Lagging Tech Sector A Sign Stock Rally Is Running Out Of Steam
The Fed wants everyone to believe that it will deliver a soft landing. Yet even with six fingers on each hand... People know the truth. The data are right in front of them. And despite wide smiles from financial pundits Thursday morning, that 3.2% inflation number wasn't something to celebrate... ... It's a reminder of the new reality... ... a reality that we'll show you how to navigate with precision and profits.
Inflation Or Nominal GDP Targeting? Whatever.
Nominal GDP targeting is the latest mainstream fad, which is allegedly going to improve central banking when compared to inflation targeting. In a certain sense, I have some sympathies. If a central bank could stabilise nominal GDP growth, it has abolished the business cycle. I am in favour of abolishing the business cycle. Doing so would not solve all economic woes, but it would be the most that can be hoped for from macroeconomic stabilisation policy.
Inflation Targeting In Practice
The figure above shows the Fed Funds target rate (or the midpoint of the target range for recent data). The back history is an anachronism: there was no announced formal target for the fed funds rate (which is an interbank rate). (According to this note by Daniel L.
Data From The U.S. And Europe Hint At Possibility Of Decoupling
Summary The latest round of U.S. data has been strong, the Fed has hiked rates again, and Fed analysts apparently have thrown in the towel on recession risks. If we start to look at developed countries starting in the mid-1990s - so a 30-year historical window - other than a couple of outliers (Japan, Australia), business cycles and interest rate cycles were largely synchronised. The synchronisation started because countries blew up their domestic economies in a variety of ways in the early 1990s.
Decoupling
Although I am not a forecaster, I periodically comment on what I would probably be looking at if I attempted to do so. Right now, the interesting thing is the possibility of a decoupling between Europe and the United States. The latest round of U.S. data has been strong, the Fed has hiked rates again, and Fed analysts apparently have thrown in the towel on recession risks (oh dear). Meanwhile, survey data out of Europe (particularly Germany) has been weak.
Advantages To Procedural Changes In Bond Market?
From my recent Torrens Zoom call, I ran into questions about procedures in the government bond markets. The main question was whether I saw potential changes to the markets to improve things. The second was more of a concern about the complexity and opacity of the bond market.
40 Million Canadians!
There has to come a point where doctors decide, I can't do my job any more - and then the situation will spiral out of control. I would use the term 'crisis': so many parts of the NHS are under such enormous pressure that they are unable to provide the personal care that patients need, unable to provide effective care, and increasingly unable to even provide safe care.
40 Million Canadians!
The estimated population of Canada has reached 40 million (link to Statistics Canada information). Although reaching that level is not particularly important, it highlights a shift that is somewhat surprising for those of us not paying close attention to Canadian statistics. The figure above highlights the increase in Canadian immigration, particularly after the pandemic dip (which reflects the border closing).
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