Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
08/22/25 – Fed surprise at Jackson Hole
In another week of listless summer trading, volatility picked up this morning as Chairman Powell addressed the gathering of Central Bankers at the annual Jackson Hole summit. Typically, a sleepy, noncommittal event for the Chairman, Powell, instead delivered a clear message that the Fed stands ready to cut rates in September.
Much of what he said was a reiteration of the July FOMC minutes that were released on Wednesday. What stuck out to us from the release was the line that upside risk to inflation and downside risk to employment remain elevated. In his speech Powell doubled down somewhat on the employment warning, leading us and most market participants to conclude that a 25-basis point rate cut in September is a foregone conclusion.
Despite the quiet week, a reordering of the usually arcane money markets continued. Notably, the daily Reverse Repo (RRP) operation conducted by the New York Federal Reserve has seen it daily volume plunge. That’s a direct result of the recent sizable increase in Treasury Bill issuance and the upward drift in interest rates the added supply has caused. RRP’s peaked at $2.5 Trillion in December 2022 but has dwindled to $25.3 billion as of yesterday’s close. With nearby Treasury bills yielding as high as 4.35%, money market traders are closing out their holdings of Repo, which currently offers a yield of 4.25% to pick up the 5 to10 basis points offered in the bill market by the same creditor.
With the expectation of a September rate cut, the yield-to-maturity of 2-year note is closing near its recent low and December Fed Fund are again pricing 50 basis point of rate cuts by year end.
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 – 6/21/24
/in Weekly Wrap/by halyardA 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
/in Weekly Wrap/by halyardThe 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.
Halyard’s Weekly Wrap – 6/7/24
/in Weekly Wrap/by halyardThe 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
/in Weekly Wrap/by halyardThe 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
/in Weekly Wrap/by halyardThe 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
/in Weekly Wrap/by halyardAfter 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.