Leading indicators suggest a hard landing
The Federal Reserve and many financial pundits are hoping for a soft-landing; a condition where real growth falls below trend rather than goes negative (a recession) after an economic boom cycle. Take these predictions with a grain of salt because they are a trope before…
The Fed used a hawkish tone this week to keep bond yields higher
The two-year rose 23 basis points this week after several Fed speakers put an emphasis on not being sure if they are done hiking rates. I suspect they used this language, not because of a changing opinion about pausing (the economic data has been weak…
Wars and Treasury Bonds
With the Israel-Hamas conflict escalating along with the ongoing Russian-Ukraine war, there is concern of wider war. War is inflationary, but Treasury yields don’t necessarily rise during them because there are often bigger forces at play such as the business cycle, secular trends in inflation,…
On the Fed meeting yesterday
Interest rates fell along the yield curve during Jerome Powell’s press conference yesterday because he remained resolute about pausing despite strong economic data since the last meeting. Markets had feared his tone would change after strong Q3 economic data. It did not. The Fed’s stance…
On Q3 GDP
Treasury yields fell after the strong Q3 GDP report this morning (+4.9%) because a big number had been incessantly talked about, predicted, and priced-in over the last three months. For the Treasury market, it was sell the rumor, buy the news. Now, the market will…
Inflation is falling fast
Despite the pervasive narrative that inflation is stubborn and sticky, it is falling quickly compared to other disinflationary periods. Both the core (excluding food and energy) and headline consumer price index have fallen at their second fastest rate compared to other historical disinflationary periods going…
Why the 2yr fell significantly after Powell spoke yesterday
The 2-year has fallen 12 basis points since Jerome Powell’s speech and interview yesterday. On the surface, he didn’t say anything new. But it was a shift because he reaffirmed his pausing stance for the first time since he last spoke about monetary policy at…
Special Report: Views from the Top
A collection of newspaper quotes over 75 years showing that the Treasury bond narrative now is typical to ones near past cyclical interest rate peaks. Fiscal fears are used when no other explanation suffices. PDF
Economic data has caused yields to rise
With the speed and magnitude that Treasury yields have risen recently, many commentators have suggested it is due to a new paradigm of high interest rates based on structural inflation, stagflation, a higher neutral real rate, or fiscal concerns. But recent economic data suggests that…
FOMC meeting summary
The FOMC forecasts were hawkish describing a soft-landing, but the press conference was dovish. Forecasts (Summary Economic Projections or SEP) Short-term rates sold off dramatically yesterday afternoon; the 2-year rose 12 basis points. This was largely because the Fed’s average expectation for the Fed Funds…