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…

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…

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…

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…