Entries by halyard

Halyard’s Weekly Wrap – 7/5/24

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Today caps off a holiday shortened week in the US that saw yields continue to fall across the curve. As we have been writing for quite some time, US economic data has been mixed and this week we saw a decided shift in surprises to the downside. Although, the headline Non-farm payroll number beat softened expectations – registering +206,000 for the month of June compared to the consensus of +190,000. The two-month downward revision subtracted 111,000 previously reported jobs, and private payrolls underwhelmed. The US unemployment rate now stands at 4.1% – up 0.6% from the January 2023 low of 3.4%.

Halyard’s Weekly Wrap – 6/28/24

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Earlier this week, the Federal Housing Finance Authority, the government regulator for Fannie Mae and Freddie Mac authorized Freddie to buy second mortgages. The intent of the agency is to make it cheaper for homeowners to tap home equity without refinancing their existing mortgage and thereby preserving the low-rate mortgages originated prior to the run up in rates. The program is an 18-month trial with Freddie authorized to buy up to $2.5 billion second mortgages. The purchases will be limited to second mortgages of $78,277 or less. Critics say that the program will be inflationary, which if it was done on a larger magnitude we would agree with, but with a $2.5 billion program cap, we doubt that will come to pass. On the other hand, it could be a slippery slope to a wider program and another government handout.

Halyard’s Weekly Wrap – 6/21/24

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A mid-week U.S. holiday, summer vacations, and noisy economic data all led to mostly unchanged bond and stock markets this week. For the week, the 2-year/30-year yield curve was 2.5 basis points less inverted, closing the week at -33.5 basis points, with the entire move coming from a marginal drop in the yield-to-maturity of the 30-year bond. The S&P 500 briefly traded into record territory but is closing the week about 1% off of the 5,505.53 record touched on Thursday.

Halyard’s Weekly Wrap – 6/14/24

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The consumer price index (CPI) for May was released Wednesday, the morning of the FOMC meeting. The one-month change to the index was 0.0% and the headline year-over-year index rose 3.3%, a 0.1% improvement over last month’s reading. Investors interpreted the change as a big step in the right direction and rallied stocks and bonds, pushing the yield curve down to recent lows and the S&P 500 to a fresh all-time high.

June 2024 – Monthly Commentary

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The Federal Reserve was adamant about reversing their series of rate hikes last December, only to be forced to back-track when economic growth reignited in the first quarter. When growth reaccelerated, there were even calls, albeit muted, that the Fed would need to raise interest rates at least one more time. Through the second quarter, the talk of another rate hike has been quelled by a resumption in the fall of inflation and a cooling in the job market.

Halyard’s Weekly Wrap – 6/7/24

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The investment community, lately, had bought into the narrative that the economy is slowing, and that the Fed was about to reengage in the rate cut conversation. The May employment report, released this morning, fully took the air out of that notion. After April’s report came in below expectation, economists were expecting the number of new jobs created for the month would total 180,000, with the low estimate at 120,000 and the high at 259,000. The actual number blew past those forecasts with 272,000 new jobs created in the month. The report was a little messy in that the household report showed a contraction of -408,000 jobs and the labor force shrunk by -250,000 workers causing the unemployment rate to tick up to 4.0%. We advise to look past that uptick due to a few nuances between the household and the establishment survey. The bottom line is the June jobs report changes the soft-landing narrative and further postpones the likelihood of a rate cut anytime soon.

Halyard’s Weekly Wrap – 5/24/24

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The release of the May 1st FOMC minutes was as expected, with the members concurring that the rate of inflation is stubbornly stuck at levels above which they are comfortable. The second sentence of the minutes read “Domestic data releases over the intermeeting period pointed to inflation being more persistent than previously expected and to a generally resilient economy,” That’s pretty much says it all. The economy continues to hum along despite the FOMC’s tightening of monetary policy. A Few economists continue to rumble that the Fed will need to again hike the overnight rate but that’s far from consensus.

Halyard’s Weekly Wrap – 5/17/24

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The April consumer price index and the various subcomponents came in as expected offering relief to investors fearful of an upside surprise. The year-over-year headline measure showed that inflation cooled to 3.4% from the 3.5% reported in March. The change in direction was welcome news to the capital markets but the incremental improvement is hardly enough for the Fed to claim victory. There’s an old saying in the capital market “that one number does not make a trend” and that clearly applies to last month’s CPI. We’ll be watching the index through the summer to identify any potential trend.

Halyard’s Weekly Wrap – 5/10/24

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After last week’s repricing of the yield curve to again reflect the possibility of one rate cut this year, the interest market barely moved this week. The dearth of economic data allowed the 2-year/30-year yield curve to remain at a 20-basis point inversion with the 2-year notes closing the week modestly higher at 4.86%. That was good news for the equity market as the S&P 500 continued to rally and now stands less than 1% away from its all-time high as earnings releases dwindle to a trickle.

Halyard’s Weekly Wrap – 5/3/24

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Investors began this week with much trepidation, given the mixed economic data and stubbornly high inflation that has characterized the first four months of this year. It was widely expected that Powell would offer a “mea culpa” for suggesting that rate cuts were imminent back in December. He didn’t go quite that far but did opine that the committee was “less confident” that inflation would fall to 2% in the near term. But he also cast doubt on the possibility that the next move in interest rates would be a hike.