Insights
U.S. Interest Rates Commentary and Research from Eric Hickman
This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell futures/securities. The material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives.
This is just a yield backup, not a new paradigm
I wrote in early January that Treasury yields would rise because economic data had turned upwards from the universally bad data released in November. As hot economic data continued in January and February, Treasury yields have risen about half of what they fell from last…
Jerome Powell on 60 Minutes last night
Last night, Jerome Powell was interviewed by Scott Pelley on 60 Minutes (taped on Thursday.) I noticed a few things: 1. At last Wednesday’s FOMC press conference, I was surprised that Powell said the strong economy wasn’t a factor in delaying rate cuts (twice.) In…
Powell quotes from the FOMC meeting today
Overall, the FOMC press conference seemed dovish today. I noticed four things in what Jerome Powell said (source): 1. Cutting rates in March is not likely as-of now but the door is open to it. Powell said, “Based on the meeting today, I would tell…
Expect the Fed to remind markets about real economic strength this week
The idea that the Fed can cut rates soon just because inflation has fallen has kept the bond market expecting a rate cut as soon as March (50% chance as of today) and the stock market elevated. This theme has allowed the bond market to…
All about Waller
Federal Reserve Governor Christopher Waller started the idea in late November that the Fed would be cutting rates soon but he took that away yesterday, likely causing a near-term inflection point towards higher short-term Treasury yields. It was a major moment for the bond and…
The bond market has gotten ahead of the economic data
Happy New Year! Economic data released in November (representing October) was uniformly negative and a major factor in how dovish the Fed was at their most recent 12/13 meeting. In the press conference, Jerome Powell said, “Recent indicators suggest that growth of economic activity has…
Heed the Ghost of Recessions Past
A short Christmas-themed piece with a reminder that despite pervasive “soft-landing” talk, the most reliable indicators of recession say otherwise. Happy holidays!
Would inflation be low enough for the Fed to cut in March?
The real Fed funds rate (Fed Funds minus inflation) is a simple metric of how tight the Fed is. Using the Fed’s preferred inflation (core PCE deflator, YoY), this is currently 1.9% (5.4% Fed – 3.5% inflation = 1.9%.) In other words, the Fed Funds…
The Fed pivots
The 2-year U.S. Treasury has fallen a large 30 basis points from the Fed meeting yesterday because the Fed was dovish when they were widely expected to be hawkish but more importantly, because of the “once a business cycle” significance of shifting towards being dovish…
Recent yield behavior is consistent with historical cyclical yield peaks
I think cyclical yield peaks were made for the Treasury market in October (on 10/18 for the 2-year and 10/19 for the 5 to 30-year.) This is based on the Fed pausing after a rate hike cycle, the yield curve de-inverting, leading economic indicators continuing…