Talk about fine-tuning. The changes in wording—let alone any shift in policy—made in today’s 12:30 statement from the Federal Reserve’s Open Market Committee are miniscule.

So, for example, today the Fed said “Despite some signs of improvement, the housing sector remains depressed…” while in its last statement on March 13 it noted that “The housing sector remains depressed…”

Inflation has picked up somewhat, according to today’s statement, but the increase is expected to be temporary. Last month, the Fed said inflation was subdued.

And here’s my favorite big change: In March the Fed said it expects moderate growth over coming quarters but today it said it expects growth to remain moderate over coming quarters and then to pick up gradually.

In short, nothing here to send those betting on Federal Reserve easing off to buy gold and nothing to drive those worried about growth kicking off higher inflation to sell their Treasuries.

The Federal Reserve did confirm its promise to keep rates at 0% to 0.25% through the end of 2014.

Federal Reserve Chairman Ben Bernanke is scheduled to give his regular post-meeting press conference today at 2:15.

Masochists can watch it live on the Federal Reserve website http://www.federalreserve.gov/ .

What’s the big deal about Spain? Why is Spain in crisis? And why is that crisis enough to shake global financial markets?

Last year the country’s government debt came to just 68.5% of GDP. That hardly puts Spain in the same class as Greece, right? The goal of the Greek rescue package, after all, is to REDUCE that country’s debt to 130% of GDP. Gosh, Spain isn’t even in the same debtor class as the United States. The U.S. debt to GDP ratio passed 100% in 2011 and is forecast to hit 112% by the end of 2013.

So why have yields on Spanish 10-year bonds climbed back within spitting range of 6%? And why has that been enough to send the global financial markets into a bout of panic selling like investors saw on Tuesday, April 10?

How about because Spain is a worse crisis than Greece and far worse than the United States. (Give us a few years, though.) The Spanish debt crisis looks like it has combined the worst of the Irish debt crisis and the Greek debt crisis and has then wrapped it in an economy big enough to make existing EuroZone facilities and mechanisms totally inadequate for a rescue. Spain looks like it’s headed down the path that required a bailout in Greece and Ireland—while everyone knows that the country is too big to bailout.

Let me start by laying out the shape of the Spanish crisis and then suggest the likely outcome. I know many of you have questions about the two Spanish stocks you’re most likely to own if you own any at all—Banco Santander (STD) and Banco Bilbao Vizcaya (BBVA). I’ll post in more detail on those later today. (Kind of a Spanish theme-day Friday. Banco Santander is a member of my Dividend Income Portfolio http://jubakpicks.com/jubak-dividend-income-portfolio/ and Banco Bilbao Vizcaya is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ ) Read more

The rout in the Treasury market continues: Yields on the 10-year note close at 2.38%, up from just 2% a little more than a week ago

Last week’s inflation numbers with the Consumer Price Index rising a steeper than expected 0.4% in February to push the annual headline inflation rate to 2.9% haven’t done anything to put the bond market in a better mood.

On March 16, the day of the inflation announcement ,10-year U.S. Treasury notes fell taking the yield to 2.31% at noon New York time. That was a huge change from Monday, March 12,  when the benchmark U.S. 10-year Treasury yielded just 2%.

This week hasn’t begun any better. The 10-year Treasury note fell in price (which means they climbed in yield) for the ninth straight day. The yield on the 10-year Treasury rose to close at 2.38%, the highest yield since October 28, 2011.

Last week’s inflation numbers reminded bond buyers that at 2% or even 2.3%, 10-year Treasuries are losing ground to inflation. Read more

Core inflation barely budges in February–but headline consumer price inflation hits a 2.9% annual rate

Headline inflation rose by 0.4% in February. That was a jump from the 0.2% increase in the Consumer Price Index in January and the biggest increase in consumer prices since April 2011.

The big culprit was the cost of energy. Gasoline prices rose 6.0% in the month and accounted for 80% of the increase in headline inflation.

Core inflation—which doesn’t include volatile food and energy prices—rose 0.1% in February. That was actually a drop from the 0.2% increase in January.

Economists surveyed by Briefing.com had expected the headline inflation number to show a 0.4% increase in February. Economists surveyed by Bloomberg had projected that the core rate would climb by 0.2%.

The Federal Reserve watches the core inflation number and there’s nothing in the less than projected 0.1% increase in core inflation in February to make Ben Bernanke and company rethink their commitment to keeping short-term interest rates at 0% to 0.25% through the end of 2014. Inflation, by this measure, is under control.

The worry these numbers have likely created at the Fed is, in fact, in the other direction—they show a significant drag on growth from higher energy prices that may slow the economy. Read more

Buy Yamana Gold (AUY)

I’d use today’s drop in gold and gold mining stocks on strength in the dollar to buy Yamana Gold (AUY). As of 1:30 New York time shares of Yamana Gold were down 4.01%.

I think the strength in the dollar is temporary due, first, to this morning’s announcement by the European Central Bank that European banks had borrowed 530 billion euros under the central bank’s new three-year loan facility. That means the central bank has added 1 trillion euros to its balance sheet since December. The central bank’s balance sheet now stands at a record 2.74 trillion. The currency markets, rightly, feel that this expansion is inflationary down the road.

The dollar’s strength is due, second, to disappointment in this morning’s testimony by Federal Reserve chief Ben Bernanke that the U.S. central bank wasn’t thinking about another round of quantitative easing that would pump more dollars into the U.S. money supply.

On a day when the European Central Bank adds 530 billion euros to its money supply, the Fed seems like a paragon of strong money.

Of course, that’s not really true. The Fed remains committed to 0% interest rates through 2014 and the U.S. government’s fiscal deficit continues to build up debt—and add to the money supply.

Before today’s drop, the U.S. Dollar Index was sinking toward a test of resistance at its 200-day moving average and gold mining stock (represented by the Market Vectors Gold Miners ETF (GDX)) had moved above its 200-day moving average.

In other words, with the dollar falling, gold and gold mining stocks were moving to new highs. I think that pattern will resume after a brief interruption. Read more