Donald Trump won the U.S. Presidency last night and there is a 97% chance that Republicans will have control of both chambers of Congress. This is the worst-case scenario for fiscal spending but the reaction from the bond market is telling. The bond market is…

On the surface, rising Treasury yields today seem impossible because non-farm payrolls and their revisions were weaker, manufacturing ISM was weaker, and Trump’s odds to win in betting markets has fallen 7 points since Wednesday meaning the “Trump trade” should be in reverse. US sovereign…

The Beige Book, a compilation of anecdotal reports on the economy that the Fed will consider for its upcoming November 7th meeting, was released today. In it, fewer districts were characterized as contracting and, combined with my work on the GDP of each Fed district,…

Two important economic data releases came out today that were divergent. Inflation in the CPI report (Consumer Price Index) was hotter than expected suggesting higher interest rates but initial jobless claims jumped up 33k suggesting lower interest rates. The bond market has mostly paid attention…

My added emphasis throughout. Yesterday, Jerome Powell sat down for a live Q&A with the President of the NABE (National Association for Business Economics), Ellen Zentner, at their annual conference. Powell had a strong bullish tone and spent much of his time trying to warn…

The question for interest rates now isn’t if there will be a recession, it is when it will come. The “recession trifecta” as I call it, has occurred; the unemployment rate rising (Sahm rule), Leading Economic Index (LEI) falling materially, and the yield curve inverting….

In an unusual situation, the bond market is going into next week’s FOMC meeting unsure of how much the Fed will cut rates. The Fed likes to, and the market expects for the Fed to telegraph what they are going to do beforehand to lessen…

The Non-farm Payroll number released today came in less than expected by 23 thousand and the prior two months were revised down another 86 thousand. The rounded unemployment rate fell 0.1% but, using another decimal, it fell just 0.03%; from 4.25% to 4.22%. The payroll…

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’…

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…