Insights
U.S. Interest Rates Commentary and Research from Eric Hickman
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Mary Daly’s hawkish hurdle
The most interesting part of Jerome Powell’s speech on Friday was that he didn’t say anything about cutting rates ‘gradually’, or ‘methodically’ which would’ve indicated that he wanted to rein in Fed cutting expectations. Some of his colleagues (including Mary Daly) had used this ‘gradual’…
A recession hasn’t started yet, but rates won’t wait to fall until it does
Summary: Short-term interest rates could rise as the Fed tries to rein in Fed cutting expectations, but because everything points to a recession soon, don’t expect this yield back-up to extend much more. The greater risk at this point is for another shoe to drop…
Still too much Fed priced-in
Even after the 2-year Treasury yield has risen 39 basis points from the intraday lows of Monday, the bond market is still priced for 4 Fed cuts (-1.03%) through the end of the year with three meetings left. This would mean 50 basis points in…
Moving too fast
I’ve been wrong with my short-term call in the last two weeks, thinking that interest rates would move higher surrounding the Fed. They have fallen dramatically. Economic data this week has been negative (ISM, Initial Jobless claims, and Unemployment/payrolls.) That, combined with the Fed’s 2nd…
Special Report: U.S. Treasuries and the Fiscal Situation
Reasonable Treasury debt ratios and more than enough buyers put Treasuries in a much better light than is commonly heard. PDFAlso on Advisor Perspectives
On the Fed meeting and Jobs report next week
The economic data from the last few days has been, on-balance, stronger for the economy. Q2 GDP, initial jobless claims, core durable goods, and monthly PCE core inflation have improved from their prior levels. Consumer spending was also revised up for May by 0.2% to…
Positive Eco Data and the Sahm rule
Over the last two days, Retail Sales, Industrial Production, Housing Starts, and Building Permits were released better than economists’ expectations. This contrasts with the nearly-uniform negative economic data we’ve seen since mid-June (see black arrow in the chart below.) Because of the contrast and because…
Bill Gross on X/Twitter today
Bill Gross below on X (formerly Twitter) today saying to buy 2-year Treasuries over the long-end as the yield curve steepening begins. This is what Lantern Capital specializes in; using leverage to give 2-year Treasuries (or related futures) the duration exposure of bonds longer on…
The inflation bulge was temporary
The consumer price index (CPI) was released today for June. Both the headline number and core came in 0.1% less than expected. Also, the closely watched subset components of Shelter and Supercore (non-housing services) were less than the month before. None of this sounds very…
Economic data and Treasury yields
I first showed a draft of my economic data index, the Lantern Daily Economic Index (LDEI), a month ago here. Since then, its weightings, name, and index inclusions have been finalized. I will provide more information about it soon. When the LDEI correlates to yields,…