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 – 08/05/22
/in Weekly Wrap/by halyardWe didn’t see that coming! On the back of the mixed June employment report, the July tally blew past all expectations. Coming in at 528,000 new jobs added, the report more than doubled the consensus expectation of 250,000 and exceeded the highest expectation of 325,000. Moreover, the details were equally eye popping, with average hourly earnings up 5.2%, year-over-year, and the unemployment rate ticking down to 3.5%, equaling the low touched on September 2019. The bond market didn’t like any of it. The yield curve that placidly drifted below 3% last week, convulsed back above that measure today. For the week, the 2-year note is 30 basis points higher, and the 2-year/30-year interest rate spread went negative for the second time this year, closing the week out decidedly inverted at -17 basis points.
Halyard’s Weekly Wrap – 07/29/22
/in Weekly Wrap/by halyardAccording to Morgan Stanley “2Q data would mark a technical recession, not an economic one”. The Wall Street firm had forecast that Q2 GDP would come in at +1.0 annualized, so they needed an excuse for their wide miss. In fact, the print was -0.9%. Economic 101 teaches that two consecutive quarters of economic contraction are a recession. Despite that, the Biden administration is saying that it’s not a recession, and points to the jobs market as proof. We agree that the jobs market remains quite healthy, but there’s more to GDP than simply income.
Halyard’s Weekly Wrap – 07/22/22
/in Weekly Wrap/by halyardFrom an economic perspective, this has been a terrible week; especially so for the housing sector. The NAHB housing index, housing starts, and existing home sales all plunged, as did mortgage applications. The earnings release from D.R. Horton, the home builder, beat expectations, but the company said that sales are expected to slow, and cancelations rise as buyers are experiencing “payment shock.” After falling a quarter point last week, the average 30-year mortgage rate ticked back up to 5.625%, giving pause to perspective buyers.
Halyard’s Weekly Wrap – 07/15/22
/in Weekly Wrap/by halyardFront end interest rate volatility remained elevated this week, with the market adding an additional 25bps increase in Fed funds post the record CPI print – January 2023 Fed Fund futures traded at a 3.49% rate a week ago, touched a 3.74% Thursday morning only to settle back to 3.50% by Friday afternoon. The shockingly high CPI print has been tempered by softer data. Headline retail sales point to a consumer muddling along – combatting higher energy prices by buying less elsewhere. The exceptions are restaurants, a slight bounce in vehicles and strength in online shopping. Overall real retail sales have fallen two months in a row. University of Michigan surveys released Friday showed a slight uptick in sentiment following June’s abysmal readings and also a slight downtick in longer term inflation expectations. The relief rally – data dispels fears of 100bps rate rise – leaves stocks up 1.7% on the day and off just 1% for the week.
Halyard’s Weekly Wrap – 07/08/22
/in Weekly Wrap/by halyardFed Governor Chris Waller “tipped his cards” on Thursday regarding this morning’s employment report, saying the “Robust labor market” gave him confidence in the strength of the economy. The report showed that the economy added 372,000 new jobs in June, well ahead of the 265,000 that was expected. Given the anecdotal weakness we’ve been witnessing, our expectation was that the jobs figure would disappoint. His comment on jobs was in addition to him saying that he favored another 75- basis point hike later this month. That rate hike recommendation was echoed by St. Louis Fed President James Bullard, and both are voters on the rate decision committee.
Halyard’s Weekly Wrap – 06/24/22
/in Weekly Wrap/by halyardAs if the investing environment couldn’t be more challenging, this week only served to further muddy the water. Fed Chairman Powell testified before Congress in what was once referred to as the Humphrey-Hawkins testimony. The testimony is mandated twice a year and the Chairman is tasked with justifying his dual mandate of keeping unemployment and inflation low. His testimony was mostly comments Congressmen don’t want to hear. Namely, acknowledging that rising interest rates poses the risk of a recession, and that the employment market is running “too hot.” In the perverse thinking of bond investors that was good news. The logic goes that If the Fed Chairman is thinking that the coming rate hikes could result in a recession, then that means that inflation will be coming down faster than they had hoped and, therefore, rates will need to be cut sooner than anticipated. Taking their cue from bond investors, the stock jockeys interpreted that logic as a signal to buy, hence the 6% rise in the S&P 500 off the low touched last week. Notably, Powell didn’t say anything at the testimony that would indicate that the committee has changed their mind about raising rates another 75 basis points at the end of July.