Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
02/27/26 –
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”. – Chuck Prince, CEO Citigroup – July 2007
There were opposing stories driving the capital markets this week with news of a continued deterioration in the private credit space being offset by a continued flow of cash into the fixed income market.
The latest credit blowup is the U.K. based Market Financial Solution Ltd. Like the high-profile collapses of First Brands Group and Tricolor Holding last year, MFS appears to be guilty of using the same collateral for multiple loans resulting in what is said to be an approximately GBP 930 million shortfall. While not enough to cause a systemic panic, the loss has again brought the topic of questionable credit practices to the fore, and with it the riskiness of private credit.
Despite that concern, the investment grade fixed income market continues to see heightened demand, especially in the short end of the yield curve. The demand for short paper pushed the 2-year note to a fresh low of 3.38%, which is somewhat perplexing given that one-month Treasury Bills offer a rate of 3.67%. Typically, the logic behind an inverted 2-year note is the expectation that the overnight rate is going to fall precipitously, such that the rate earned over the 2-year holding period would exceed that earned by rolling Treasury Bills. With the unemployment rate seeming to stabilize, inflation no longer falling, and corporate earnings continuing to grow at a healthy pace, we don’t think that’s likely. While Fed Fund futures are pricing in more than two 25 basis point rate cuts by next year, we think at most we’ll see only a single cut.
Of the secondary economic data released this week the Chicago PMI business conditions index stood out. The index registered 57.7 at the last reading, well above the 37.3 low touched in November 2025. Could it be that businesses are becoming more confident? We will watch the other confidence measures to see if they show improvement as well.
Economic data to be released next week includes the Retail sales measure for January, which is expected to be flat versus the prior month, and non-farm payrolls for February – which is expected to show a gain of 60,000 new jobs for the month.
This commentary is being provided by Halyard Asset Management, L.L.C. and its affiliates (collectively “Halyard” or “we”) for informational and discussion purposes only and does not constitute, and should not be construed as, investment advice, or a recommendation with respect to the securities used, or an offer or solicitation, and is not the basis for any contract to purchase or sell any security, or other instrument, or for Halyard to enter into or arrange any type of transaction as a consequence of any information contained herein. Although the information herein has been obtained from public and private sources and data that we believe to be reliable, we make no representation as its accuracy or completeness. The views expressed herein represent the opinions of Halyard Asset Management, LLC, or any of its affiliates, and are not intended as a forecast or guarantee of future results. Past performance is not indicative of future results.
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Halyard’s Weekly Wrap – 10/28/22
/in Weekly Wrap/by halyardLast week’s Fed leak that they would consider slowing the trajectory of rate hikes at the November 2nd FOMC meeting continued to dominate trading this week. Consensus seems to be developing that the recent softening of economic data will force them to temper their hawkishness and will raise the overnight rate 75 basis points next week and another 50 basis points in December. Reflecting that, the 5-year note fell to 4.06% before closing the week at 4.18%, on the back of a stellar auction on Wednesday. The auction cleared at 4.192%, through the presale when-issued yield of 4.21. The bid to cover rose to 2.48 times versus 2.27 times at the last auction, indicating that demand was high
Halyard’s Weekly Wrap – 10/21/22
/in Weekly Wrap/by halyardA 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.
Halyard’s Weekly Wrap – 10/14/22
/in Weekly Wrap/by halyardThere 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%.
Halyard’s Weekly Wrap – 10/07/22
/in Weekly Wrap/by halyardHigher 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.
Halyard’s Weekly Wrap – 09/30/22
/in Weekly Wrap/by halyardChaos 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.
Halyard’s Weekly Wrap – 09/23/22
/in Weekly Wrap/by halyardAs was expected, the Fed raised the overnight lending rate corridor by 75 basis points, to 3.0%-3.25% and in decidedly hawkish post-meeting press conference, the Chairman signaled that they are not yet close a peak in the rate. It was communicated that Fed funds would likely end the year at 4.25%. That news rocked the Treasury market with the 2-year note closing the week 32 basis points higher at 4.19%, just off the intraweek high of 4.25%. The yield curve further inverted, closing at a -57 basis points, just a shade below the -75 basis points touched in May 2000.