Halyard’s Weekly Wrap – 10/21/22

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A Wall Street Journal story released this morning suggested the Fed would raise rates by 75 basis points at the November FOMC meeting but would then evaluate the need and magnitude of a December rate hike. The market had been anticipating 75 basis point hike at each of the meetings. As we’ve seen in the past, most notably in June when the Fed leaked that they intended to raise rates by 75 basis points, the Fed will leak their intentions in an effort to prepare the market for a change. Whether it was a deliberate signal or cover for St Louis Fed President Bullard’s ethical gaffe, the market heard it loud and clear. The two-year note fell 14 basis points on the day as did Fed Fund futures. The peak in Fed Fund futures continues to be May 2023.

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Halyard’s Weekly Wrap – 10/14/22

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There was precious little for the Fed to celebrate this week. The all-important employment report has been relegated to second tier status as the producer and consumer inflation measures take center stage as the most important measure of the Fed’s success, or as is the case in this week’s report, failure. Both measures came in above expectations and didn’t really offer any indication that the rate hikes to date have been successful. The markets reacted mostly as expected. The 30-year bond, after a brief short covering rally on the day of the CPI release is closing the week just a basis point below 4.00%. Similarly, the 2-year note is closing the week at 4.50%. Fed Fund futures reset materially higher, with the May 2023 contract indicating a peak Fed Funds rate of 4.935%.

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September 2022 – Monthly Commentary

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As of late, there has been little for the Fed to celebrate. The all-important employment report has been relegated to second tier status as the Producer and Consumer inflation measures take center stage as the most important measure of the Fed’s success. With the release of the September report, the Fed’s efforts this year represent a distinct failure. Both measures came in above expectations and didn’t really offer any indication that the rate hikes to date have been successful. The markets reacted mostly as expected. The 30-year bond, after a brief short covering rally on the day of the CPI release is trading just above 4.00%. Similarly, the 2-year note is trading just below 4.50%. Fed Fund futures reset materially higher, with the May 2023 contract indicating a peak Fed Funds rate of 4.93%.

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Halyard’s Weekly Wrap – 10/07/22

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Higher rates for longer was the concise message out of the Federal Reserve this week. After an attempt at rallying on Monday, both stock and bond prices rose with quarterly rebalancing and short covering, markets again succumbed to the Fed’s message by the week’s end. The S&P 500 finished up 5.5% higher by Tuesday evening and the yield to maturity on the 2 year US Treasury Note finished lower by 17bps to close October 4th at 4.09%. The rallies were driven in part by the 3rd shot at a narrative that encompasses a central bank on the cusp of slowing the pace of rate hikes.

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Halyard’s Weekly Wrap – 09/30/22

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Chaos erupted overnight Sunday in the U.K. as investors reacted harshly to announced tax cuts and sent Gilt interest rates soaring. The U.K. is besieged with a similar inflation problem as the rest of the world and the proposed tax would likely worsen rising prices. By Tuesday morning the 10-year note was a full 100 basis points higher in yield before the Bank of England announced that they would intervene and buy Gilts. After all was said and done, the U.K. 10-year ended the week 20 basis points lower at 3.81%, but not before “dinging” the U.K. government’s willingness to fight inflation at whatever cost.

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