Halyard’s Weekly Wrap – 08/27/21
Powell turned ever so mildly dovish in his comments to the virtual Jackson Hole Central Bank meeting on Friday. Despite a cadre of Central Bankers calling for an immediate halt to the open market purchases, the Chairman said the Open Market Committee is likely to commence tapering before the end of 2021. We believe the street had set up for more hawkish language, with some looking for an announcement that taper would begin in September. That was a foolish call! While the Fed doesn’t always look to the calendar in making policy announcements, the Chairman had to realize that doing so on the last Friday of August would rock the market. Instead Treasuries traded sideways which was enough to drive the S&P 500 to another record high.
With the news wires busy with the mess in Afghanistan, President Biden’s stimulus package and, of course, COVID, the general public seems to have forgotten that the U.S. if facing yet another Debt ceiling that is expected to arrive in the coming weeks. The short maturity fixed income crowd has not lost site of the fact though, as evident in T-bill yields. Nearby maturities are trading at 0.02% as buyer are willing to pay a premium to ensure that they get paid back at maturity. We expect that the ceiling will ultimately be raised, as it always is, but not before more back and forth between the two parties.
The BLS will release the August employment report next week on Friday, the day before the U.S. 3 day weekend. Note that Friday will be a full trading day, and likely to be a volatile one at that.
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