PrefBlog

Bloomberg has some chatter on the Fed derby:

Investors are increasingly seeking advice on how the potential nomination of Lawrence Summers as chairman of the Federal Reserve instead of Vice Chairman Janet Yellen might influence monetary policy and financial markets.

Inquiries about Summers’s chances “are picking up a lot,” said Matthew Benjamin, an analyst at Medley Global Advisors LLC in Washington, a firm that provides political intelligence to hedge funds. “Wall Street is very interested in this, and there is a perception that there is a difference between Yellen and Summers” in their approach to monetary stimulus.
…
The possibility of a Summers chairmanship has contributed to the increase in borrowing costs because he is seen as likely to end the Fed’s quantitative easing sooner than Yellen would, said Krishna Memani, New York-based chief investment officer of fixed income at Oppenheimer Funds Inc., with about $208 billion under management.
…
While former Treasury Secretary Summers, 58, has no record making monetary policy, he expressed skepticism about the effectiveness of QE in an April conference hosted by Drobny Global Advisors.

By contrast, Yellen’s views are well known after more than a decade at the central bank. Yellen, 67, was a Fed governor from 1994 to 1997, president of the San Francisco Fed from 2004 to 2010 and vice chairman since 2010.

She has been an architect of the current stimulus campaign and Fed communication strategy and has never dissented from a monetary policy decision under Bernanke.

“We know with Yellen that she will continue with their current program,” Memani said. “With Summers it’s a lot less certain.”

Organized labour – such as it is – has indicated a preference for Yellen:

[AFL-CIO President Richard] TRUMKA: Well, what I said is, if you look at history and their records, she seems to have the edge, she seems to be a better candidate from our point of view, and here’s why. One, when things were going wrong in the economy, in each one of those instances, she predicted them accurately. Larry didn’t. Larry we thought at that time was too close to Wall Street, and it allowed him to jade his thought process.
The second thing is, Janet Yellen has been for a balanced approach to the Federal Reserve. That means that – they have two mandates, fight inflation and create full employment. Larry and everyone before, all the way back to Paul Volcker, have said we’re not going to worry about full employment, we’re only going to worry –
[Talking Head Al] HUNT: But Larry does say he worries about full employment.
TRUMKA: Recently. And I hope that that continues on. And if he becomes the – the chair of the Fed, I hope he continues on and – and aggressively enforces that part of his mandate, as he does the inflation mandate.
HUNT: So, therefore, if Obama were to nominate Summers rather than your preference, which would be Yellen, you wouldn’t oppose the Summers nomination?
TRUMKA: I don’t know. It would all depend on what happens, you know, what’s said and what he’s going to do.

The Canadian preferred share market closed the month with another good day, with PerpetualDiscounts winning 40bp, FixedResets gaining 12bp and DeemedRetractibles up 26bp. The Performance Highlights table reflects the move, although it is much shorter than it has been in the past couple of weeks. Volume was on the low side of average.

This entry was posted on Friday, August 30th, 2013 at 9:31 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.