Entries by halyard

Halyard’s Weekly Wrap – 11/12/21

Wednesday November 10th provided a proverbial “gut punch” to the capital markets. The day started with the inflation report for October that was way above expectations and was capped with a 30-year bond auction that was an absolute disaster.  Year over year CPI came in at 6.2% versus the 5.4% registered last month.  Fed Chairman Powell continues to believe that the uptick in inflation is going to pass but it’s not happening, and people are not happy about it.  In the latest release, energy had an outsized effect on the result, climbing 4.8% month-over-month, but that represents a little over 7% of the total.

October 2021 – Monthly Commentary

Wednesday November 10th provided a proverbial “gut punch” to the capital markets. The day started with the inflation report for October that was way above expectations and was capped with a 30-year bond auction that was an absolute disaster.  Year-over-year CPI came in at 6.2% versus the 5.4% registered last month.  Fed Chairman Powell continues to believe that the uptick in inflation is going to pass but it’s not happening, and people are not happy about it. 

Halyard’s Weekly Wrap – 11/05/21

This was supposed to be the week that the Fed, the Bank of England and, to a lesser extent, the ECB eased off the accelerator of monetary policy. As communicated for several months now, Chairman Powell announced that the Fed would begin to taper open market purchases in the amount of $15 billion per month. At the post-meeting press conference, which is typically a non-controversial “softball” affair, the tone of the Q&A got a bit confrontational. Powell reiterated repeatedly that the Fed was in no way prepared to raise the Fed Funds rate. After driving home that point, the line of questioning turned to the trading scandal that cost Fed Presidents Kaplan and Rosengren their jobs. We had thought the matter had been put to bed but apparently the media didn’t get the memo. Powell was put through the rhetorical wringer with questions like how he’d restore the confidence of the American people and if he felt the new policy went far enough. He got through those questions with an even tone, but when asked if the trading scandal would hurt his chances for Biden to renominate him and for Congress to approve his approve his nomination, there was decidedly a bit of annoyance in his “I’m not going to answer that question” response. Otherwise, investors were delighted that a rate hike is not contemplated anytime soon, as witnessed by the simultaneous rally in stocks and bonds to close out the week.

Halyard’s Weekly Wrap – 10/29/21

The dour mood bond buyers have been in since early August reversed itself in a bout of short covering this week, with an especially sharp move on Wednesday.  On that day alone, the 10-year Treasury note plunged 9 basis points.  The fall in yield occurred despite mostly better than expected economic data, and was highlighted by an outstanding 5-year note auction.  Bucking the trend of weaker, tailing auctions, the $61 billion 5-year note cleared 2.5 basis points below the at-auction yield.  Moreover, Primary Dealers bought 17.9% of the auctioned amount, the third lowest result since 2004.  The momentum was enough to carry the 30-year note below 2.00% for the first time since early September.  That’s not to imply that we’ve turned bullish on the bond market.  To the contrary, we think the price action this week was simply supply and demand coming back into balance after several bearish months.

Halyard’s Weekly Wrap – 10/22/21

Fed Chairman Powell ended the week by delivering a “wishy washy” overview of the economy and monetary policy at a virtual panel discussion. In fairness, he avoided using the word “transitory” to describe the rising prices that have consumers loudly complaining. Instead, he characterized inflation as being elevated and will likely stay that way for a bit longer. He did acknowledge what we learned from the minutes of the last FOMCC meeting that taper will begin soon and conclude next summer.

Halyard’s Weekly Wrap – 10/15/21

There was much to analyze this week with inflation coming in higher than expected and retail sales surprising to the upside. Equities once again pulled themselves off the mat and appear poised to go at least a few more rounds with greedy and fearful investors. Less obvious but quite telling is the yield curve flattening that took place. The spread between the 2-year note and the 30-year bond has flattened 18 basis points since last Friday. That’s a meaningful move and hints that investors are starting to position for a sooner than advertised interest rate hike.

Halyard’s Weekly Wrap – 10/08/21

At first glance the September unemployment report released on Friday looked wildly disappointing. It’s been described as “Disastrous” at several media outlets. Consensus was looking for 500,000 newly created jobs for the month, and to be honest, we would have taken the over on that bet. Instead the BLS reported that the economy generated 194,000 jobs for the period. 

September 2021 – Monthly Commentary

At the September FOMC meeting Chairman Powell and the Open Market Committee failed to signal a concrete start to tapering open market purchases, but they did inch closer.  Powel described current economic condition as having mostly met the committee’s standard to begin to taper and suggested that an announcement would be made at the November meeting.  It was also announced that the Reverse Repo (RRP) operation designed to sop up excess front end liquidity will be doubled from $80 billion per counterparty to $160 billion.  That totals over $12 trillion dollars if every counterparty maxed out the operation!  The size of outstanding RRP ballooned at quarter end, totaling over $1.6 trillion, a record for the program.

Halyard’s Weekly Wrap – 10/01/21

Fundamentals took a back seat to political in-fighting this week as the Republicans made it clear that they were going to do precious little to assist the Democrat’s goal of lifting the debt ceiling, keeping the government open for business, or passing Biden’s $3.5 trillion social stimulus. Interest rates moved higher across the curve as the uncertainty of fiscal policy spooked bond investors. The new 2-year note auction that was held on Monday was described by one pundit as “gruesome”, given the below average bid-to-cover ratio, and the yield at which it cleared, which was nearly a basis point above the yield asked at auction time. Following the auction, the yield-to-maturity of the 2-year note rose to 0.31%, before drifting back down to 0.266% to close out the week. That’s nearly double where the note traded last summer! Stocks fared worse, with the S&P 500 trading down about 2.5% for the week.

August 2021 – Monthly Commentary

August proved to be the quietest month of an unusually quiet summer.  The 10-year Treasury Note had a 13 basis point range for the period.  The supposed highlight of the month was to be Chairman Powell’s comments to the virtual Jackson Hole Central Bank meeting on the last Friday of the month.  Despite a cadre of Central Bankers calling for an immediate halt to the open market purchases, the Chairman fell short of that mandate, saying the Open Market Committee is likely to commence tapering before the end of 2021.