Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
06/26/26 –
The first full day of summer ushered in a week of market doldrums, with secondary economic data showing the economy continues to expand, albeit at a modest pace. New home sales fell 7.3% in May from the previous month, but that abysmal result was offset by personal spending which rose 0.7% in the month. The third look at Q1 GDP showed a surprising revision from 1.6% annualized growth to 2.1%. With the conclusion of the second quarter next week, the Atlanta Fed GDP Now measure is forecasting Q2 is going to show 2.54% growth.
Despite the subdued mood, two high profile corporations issued mega sized deals. Nvidia and SpaceX both came to market with $25 billion deals with maturities across the curve. The initial price talk for the SpaceX deal was 140 basis points over the comparable Treasury 5-year note. Demand was so immense that the spread contracted to 110 basis points at pricing time. Those investors that enthusiastically bought that debt were soon to regret the purchase as the 5-year SpaceX paper is closing the week at a spread of approximately 120 basis points.
The sharp contraction in the yield curve seen last week reversed somewhat this week with the 2-year/30-year spread widening to 78 basis points, roughly 10 basis points wider from the close of last Friday. The equity market also drifted this week with the S&P 500 roughly 1.75% lower on the week.
Next week the employment report will be released on Thursday as the Independence Day holiday is observed on Friday. The expectation is for 125,000 new jobs added, basically unchanged from the 120,000 jobs created in the prior month. Also worthy of watching, Chairman Warsh is scheduled to participate in a panel discussion at the ECB forum along with Central Bank heads form Europe, England, and Canada. Notably, there will be a Q&A session to follow. This will be the first public comments by Warsh since last week’s post-FOMC press conference.
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 – 01/28/22
/in Weekly Wrap/by halyardAs economist debate the message Chairman Powell delivered to investors on Wednesday, the fact remains that the Fed continues to pursue emergency monetary policy. For evidence, one need look no further than the bi-weekly System Open Market Account Holdings report that was released this past Wednesday. The report, essentially the Fed’s balance sheet, has swelled to $8.3 trillion, up from $7.74 Trillion on September 1st.
Halyard’s Weekly Wrap – 01/21/22
/in Weekly Wrap/by halyardHappily, there’s been a dearth of Central Bank speeches this week, and that’s been mostly good for the bond market. Last week the investment community worked to digest the possibility of four rate hikes this year. We remain skeptical that the Fed is able to endure the pressure such a string of rate hikes would exact on the equity market. In fact, we wonder how the fed is feeling about the 7% year-to-date drawdown of the S&P 500. At any rate, we’ll know next Wednesday afternoon as the Fed concludes their first Open Market Committee meeting of the new year. As we’ve written recently, historically the Fed, having admitted that inflation has proven more stubborn than anticipated and with an economy going gangbusters, would tighten policy immediately.
Halyard’s Weekly Wrap – 01/07/22
/in Weekly Wrap/by halyardFor the second month in a row the employment reports told two conflicting stories. The establishment survey came in at less than half of consensus expectation at 199,000 new jobs, while the household measure registered 651,000 new jobs in the month. That measure was enough to push the unemployment rate down to 3.9%, and within a “chip shot” of the post financial crisis low of 3.5%. That comes on the back of the surprisingly hawkish minutes of the December 15th Fed meeting. Not only did the minutes solidly indicate a March liftoff in Fed Funds, the committee apparently had a meaningful discussion on the appropriate size of the Fed balance sheet under normal circumstances and how fast they would allow a runoff of maturing securities.
Halyard’s Weekly Wrap – 12/23/21
/in Weekly Wrap/by halyardThe week started with the markets panicky that the omicron variant was going to drive the world back into lockdown, but that fear has subsided going into the last trading day of the holiday shortened week. The long bond is challenging the high yield of the month, trading at a yield-to-maturity of 1.90%, but still solidly below 2.0%. Economic data this week, all secondary in importance, continues to point to a robust economy. Investors seem to be turning a blind eye to three projected rate hikes, as the S&P 500 is again within basis points of another all-time high.
Halyard’s Weekly Wrap – 12/17/21
/in Weekly Wrap/by halyardAs expected, Chairman Powell turned “tough” at the post-Open Market Committee meeting this week and announced the accelerated wind-down of the Fed open market purchases. Moreover, the so-called “dot plot”, the committee’s forecast for interest rates, is projecting three rate hikes in 2022 and three more in 2023. We would have preferred to hear that message last January, but Powell failed to take action despite the rise of inflation and accelerating economy.
Halyard’s Weekly Wrap – 12/10/21
/in Weekly Wrap/by halyardTreasury yields drifted higher and stocks closed at or near record highs in somewhat muted trading this week. The price action was a little surprising given the outsized economic data reported. The least watched, but one of our favored measures, the Job Openings and Labor Turnover Survey (JOLTS), counted 11,033,000 available and unfilled jobs in the economy. That was only the second instance that JOLTS topped more than 11 million. The second economic surprise was initial jobless claims for unemployment insurance which counted 184,000 applicants for the week ended December 4th.