November 2019 As we ease into year end, the Fed has managed to avoid upsetting the capital markets as it did last December. Fed Chairman Powell, at the recent post-FOMC press conference sounded a tone of neutrality with regards to policy and despite repeated questions about the next move in the overnight lending rate, he […]
December 2019 The bullish stock market that generated such outsized returns last year continues its upward trajectory in the opening days of 2020. Undeterred by a supposed Iranian plot to kill Americans, the United States’ removal of the supposed plot mastermind, the Iranian missile attack response, including the Iranian attack of a Ukrainian passenger aircraft, […]
October 2019 Last month we wrote of the technical hiccup in the Repo market, the financing mechanism Wall Street utilizes to borrow money to pay for securities. We identified it as a symptom of too much government borrowing as the U.S. runs wider and wider deficits. To reiterate, the repo market is a little-followed, but […]
September 2019 An esoteric segment of the Fixed Income market not normally followed by the broad investment community is the Repo market (Repo is short for Repurchase Agreement). Repurchase agreements are the mechanism in which U.S. Treasury note and bond positions are borrowed or lent; the so called “grease” of bond market leverage. During the […]
August 2019 Since the interest rate cut at the end of last month, economic data has continued to suggest that the economy is growing moderately despite some trepidation in the manufacturing sector over trade tensions. Despite that fear, services and consumption continue to drive the economy. Moreover, with the workforce at full employment and wages […]
July 2019 The Federal Reserve lowered the overnight Fed Fund rate by 25 basis points as expected, at the conclusion of last month’s FOMC meeting. As is the case following every FOMC meeting, the Fed Chairman gave a press conference with the goal of ensuring market participants understand the thinking of the committee. Typically, the […]
June 2019 Last month we discussed the sudden and dramatic shift in interest rate expectations given the weakness of the May jobs report. We wrote about how that was not the first undershoot this year and that previous misses have been reversed in subsequent releases. It turns out that our guess was right, as the […]
May 2019 We’re another month into the U.S.-China trade dispute and it appears that select economic data is softening somewhat. Despite that, we’re reluctant to jump to conclude that economic growth is on the verge of a recession. The most recent indicator to disappoint was the May employment report which indicated an increase of 75,000 […]
April 2019 As we’ve written for the last few years, interest rates across the yield curve are too low given the strong economic backdrop. Testament to its sustainability, the U.S. economy has continued to grow despite the behavior of politicians on both sides of the aisle and the Atlantic Ocean. The sharp drop in interest […]
March 2019 Investor perception has turned with regard to fundamental economic activity and the pricing of interest rates. The Federal Reserve has targeted the Fed Funds rate at approximately 2.42% while the yield on the 5-year Treasury note is 2.30%. That the 5-year note yields less than the overnight rate is known as an inversion […]