Fed minutes confirm selldown, reveals debate; airfreight markets leap higher; EU and Japan make huge trade deal; UK has insider trading epidemic; ATO hit again; UST 10yr yield at 2.33%; oil and gold lower; NZ$1 = 72.7 US¢, TWI-5 = 76.9

But first, in Washington the latest set of Federal Reserve minutes have been released and it is clear from them they have concrete plans to start shrinking the central bank’s large portfolio of bonds and other assets in the next few months.

Hmmmm....

Federal Reserve policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises, according to the minutes of the Fed's last policy meeting on June 13-14 released on Wednesday.

The details of the meeting, at which the U.S. central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.

"Most participants viewed the recent softness in these price data as largely reflecting idiosyncratic factors...however, several participants expressed concern that progress...might have slowed and that the recent softness in inflation might persist," the Fed said in the minutes. Read more

Raising the Fed Funds rate to ~3.00% will more than likely involve committing more securties to RRP draining operations to enforce the rate corridor floor. Currently this activity absorbs ~$500 billion. Some claim this could rise toward $1.5 trillion if the desired level of consumer inflation never materialises, but rates have to be normalised. Add this to the asset offset to circulating currency liabilities and at least ~$3 trillion of liquid secutities will have to retained on the Fed's balance sheet.

Vovlo announcement is pure marketing nonsense. Hybrids are primarily driven by internal combustion engines. The electrive drive is just a small energy recover system.

"This announcement means that we will no longer manufacture cars driven by internal combustion engines," says Håkan Samuelsson. "

"Volvo Cars will launch five cleaned electric cars between 2019 and 2021, three of which will be Volvo models and two electrified performance cars from Polestar, the Volvo Cars performance brand. Full details of these models will be announced at a later date.

These five cars will be complemented by a number of gasoline and diesel-based plug-in hybrids and 48-volt mild hybrids,"

The only true increase in aggregate corporate cash flows over the last ten years was when businesses in the US were starting in November 2008 (when systemic liquidity was at its worst) for six months cutting an average of 700k jobs each and every month. It has been a lesson that stayed learned largely because monetary policy has done nothing to alleviate liquidity pressures (proven by more than just 2011), preferring instead the attempted manipulation of sentiment.

Spare cash is, from the view inside of boardrooms, better either hoarded or “invested” in share repurchases. Committing to expansion is under these circumstances (liquidity preferences) the highest risk scenario, meaning high risk and little expected return. Thus, the world remains stuck in liquidity preferences no matter what – at least until someone actually and directly addresses the real monetary problem. Read more

US creating a source of greater fools?

Two major changes in the mortgage market go into effect this month, and both could help millions more borrowers qualify for a home loan. The changes will also add more risk to the mortgage market.

First, the nation's three major credit rating agencies, Equifax, TransUnion and Experian, will drop tax liens and civil judgments from some consumers' profiles if the information isn't complete. Specifically, the data must include the person's name, address, and either date of birth or Social Security number. A sizeable number of liens and judgments do not include this information and have subsequently caused some misrepresentations and mistakes.

Of about 220 million Americans with a credit profile, approximately 7 percent have liens or civil judgments against them. With these hits to their credit removed, their scores could go up by as much as 20 points, according to a study by credit rating firm Fair Isaac Corp. (FICO). Read more

Every single car I have owned has an electric motor, usually just to run the windscreen wipers.