Tuesday, 2 April 2013

U.S. Money, Credit & Treasuries Review (as of 20 March-13)

U.S. Money, Credit and Treasuries Review as of 20 March 2013
The broad measures of money supply in the U.S. continued, as has become customary, to expand rapidly on last year for the bi-weekly period ending 20 March 2013. Bank credit also expanded on last year, but at a slower pace than the broad measures of money supply. However, all the broad measures of money supply and bank credit are currently lower (although not by much) than the all-time highs achieved on 9 January this year:
  • M2 is 0.28% lower
  • MZM is 0.18% lower
  • M2+IMF+LTD* is 0.35% lower 
  • Bank Credit is 0.17% lower

The M2 money supply was up 6.78% on the same period last year while the M2+IMF+LTD* money supply increased 5.64%. For the last seven bi-weekly periods the latter has increased at the fastest pace since the middle of 2009, but this growth has slowed somewhat during the last three bi-weekly periods.

Bank Credit contracted 0.04% on two weeks ago, but expanded 4.10% on the same period last year. This however remains lower than the around 6% YoY increase during the summer of last year (and at the end of December). All money supply values and bank credit are close to their all-time highs.

The longer term growth rates (12 month moving average YoY growth) for M2+IMF+LTD and bank credit are still heading upwards, but are considerably lower than they were during most of the 1997 to 2010 period. On the same basis, the M2 money supply is currently growing at its fastest pace since the early parts of 1987.

The 1-Year and 10-Year U.S. treasury yields remain of course extremely low in a historical perspective. Compared to one year ago the 1-Year treasury yield is down 0.05 percentage points (from 0.20% to 0.15%) and declined 0.01 percentage point from two weeks ago. The 10-Year treasury yield decreased by 0.21 percentage points compared to same period last year and decreased 0.10 percentage points compared to two weeks ago. The spread between the 10-Year and the 1-Year treasury yield is currently 1.86 percentage points, a decline of 0.16 percentage points on last year and 0.11 percentage points higher than two weeks ago. 

*The Federal Reserve stopped publishing its M3 Money Supply series back in 2006. As an incomplete substitute, the M2+IMF+LTD money supply is a broader measure than M2 and consists of M2 + Institutional Money Funds + Large Time Deposits, data series which used to be included in the M3 series and which are still reported on a regular basis by the Fed.

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