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.
Contact Us
Location
399 Knollwood Road
Suite 107B
White Plains, NY 10603
Halyard’s Weekly Wrap – 12/03/21
/in Weekly Wrap/by halyardTrading this week was dominated by Chairman Powell’s sudden hawkishness and the November jobs report. The headline nonfarm payrolls came in well below expectation, registering 210,000 new jobs versus consensus expectation of 531,000. That statistic is based on a survey of businesses. The Bureau of Labor also releases an employment measure based on a survey of households and that measure showed a gain of 1.1 million new jobs in the month, significantly above expectations and the polar opposite of the nonfarm farm result. Moreover, the household report showed that 594,000 persons reentered the workforce and, as a result, the unemployment rate fell to 4.2%, down from 6.3% in January of this year and well below the 14.8% rate registered in April 2020.
Halyard’s Weekly Wrap – 11/19/21
/in Weekly Wrap/by halyardAt the press conference following the last FOMC meeting, chairman Powell described the employment recovery as incomplete, leaving market participants to conclude that the then just decided directive to taper open market purchases would be the modus operandi, at least for the foreseeable future. We call that interpretation into question with today’s comments by Vice Chairman Richard Clarida and Fed Governor Chris Waller. In separate speeches they both communicated that the Fed may need to discuss speeding up to pace of taper at the meeting in December.
Halyard’s Weekly Wrap – 11/12/21
/in Weekly Wrap/by halyardWednesday November 10th provided a proverbial “gut punch” to the capital markets. The day started with the inflation report for October that was way above expectations and was capped with a 30-year bond auction that was an absolute disaster. Year over year CPI came in at 6.2% versus the 5.4% registered last month. Fed Chairman Powell continues to believe that the uptick in inflation is going to pass but it’s not happening, and people are not happy about it. In the latest release, energy had an outsized effect on the result, climbing 4.8% month-over-month, but that represents a little over 7% of the total.
Halyard’s Weekly Wrap – 11/05/21
/in Weekly Wrap/by halyardThis was supposed to be the week that the Fed, the Bank of England and, to a lesser extent, the ECB eased off the accelerator of monetary policy. As communicated for several months now, Chairman Powell announced that the Fed would begin to taper open market purchases in the amount of $15 billion per month. At the post-meeting press conference, which is typically a non-controversial “softball” affair, the tone of the Q&A got a bit confrontational. Powell reiterated repeatedly that the Fed was in no way prepared to raise the Fed Funds rate. After driving home that point, the line of questioning turned to the trading scandal that cost Fed Presidents Kaplan and Rosengren their jobs. We had thought the matter had been put to bed but apparently the media didn’t get the memo. Powell was put through the rhetorical wringer with questions like how he’d restore the confidence of the American people and if he felt the new policy went far enough. He got through those questions with an even tone, but when asked if the trading scandal would hurt his chances for Biden to renominate him and for Congress to approve his approve his nomination, there was decidedly a bit of annoyance in his “I’m not going to answer that question” response. Otherwise, investors were delighted that a rate hike is not contemplated anytime soon, as witnessed by the simultaneous rally in stocks and bonds to close out the week.
Halyard’s Weekly Wrap – 10/29/21
/in Weekly Wrap/by halyardThe dour mood bond buyers have been in since early August reversed itself in a bout of short covering this week, with an especially sharp move on Wednesday. On that day alone, the 10-year Treasury note plunged 9 basis points. The fall in yield occurred despite mostly better than expected economic data, and was highlighted by an outstanding 5-year note auction. Bucking the trend of weaker, tailing auctions, the $61 billion 5-year note cleared 2.5 basis points below the at-auction yield. Moreover, Primary Dealers bought 17.9% of the auctioned amount, the third lowest result since 2004. The momentum was enough to carry the 30-year note below 2.00% for the first time since early September. That’s not to imply that we’ve turned bullish on the bond market. To the contrary, we think the price action this week was simply supply and demand coming back into balance after several bearish months.
Halyard’s Weekly Wrap – 10/22/21
/in Weekly Wrap/by halyardFed Chairman Powell ended the week by delivering a “wishy washy” overview of the economy and monetary policy at a virtual panel discussion. In fairness, he avoided using the word “transitory” to describe the rising prices that have consumers loudly complaining. Instead, he characterized inflation as being elevated and will likely stay that way for a bit longer. He did acknowledge what we learned from the minutes of the last FOMCC meeting that taper will begin soon and conclude next summer.