Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
07/31/26 –
At the post-FOMC press conference Kevin Warsh surprised investors with his lack of commitment, either hawkish or dovish, in his comments to reporters. Since assuming the role as chairman two months ago, his comments have been decidedly hawkish. In an unofficial survey prior to the meeting about 20% of those surveyed were expecting a surprise rate hike. Warsh has mentioned on numerous occasions that inflation was running too hot for his liking. Despite those public comments there were only 3 members of the committee that voted for a rate hike.
In his press conference he made several contradicting statements that left everyone a bit confused. Specifically, when asked if the recent rise interest rates was an indicator that the Fed should raise the overnight rate, he “waffled” and suggested that it was in response to better than expected economic news of late. When asked about the next move in rates he completely demurred, which left the questioners, and us, a bit baffled. He has explicitly said that he intends to use the overnight rate as the primary policy tool, but if he’s of the opinion that inflation is too high, then the overnight rate is too low.
Bond investors initially cheered with the 2-year note rallying to close the day at 4.27% after touching 4.32% earlier in the morning. The market is giving some of that back, with the 2-year/30-year yield curve closing the week at 99 basis points, 10 bps wider than where it was earlier in the week.
With so much focus on the Fed, the headline advance GDP report was largely ignored. The Bureau of Economic Analysis estimates that Q2 GDP grew at a l.5% annualized rate, materially below the 2.0% expectation. However a closer look at the underlying details softens the headline number. Private domestic final purchases (PDFP), the cleanest look at how much Americans are buying, rose to 3.9% over the first quarter. The difference between the total GDP and the PDFP was mainly attributable to the widening trade deficit and inventory destocking detracting from growth.
Released along with GDP was the inflation component of the report. That showed that core PCE price index rose 3.4% annualized, down from 4.4% recorded in Q1, but still above the 2% target quoted by the FOMC.
Next week brings the employment report for July. The consensus is expecting the BLS to show that 86,000 new jobs were added in the month, better than the 57,000 added in June but slightly below the 3-month average of 98,600.
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 – 10/15/21
/in Weekly Wrap/by halyardThere was much to analyze this week with inflation coming in higher than expected and retail sales surprising to the upside. Equities once again pulled themselves off the mat and appear poised to go at least a few more rounds with greedy and fearful investors. Less obvious but quite telling is the yield curve flattening that took place. The spread between the 2-year note and the 30-year bond has flattened 18 basis points since last Friday. That’s a meaningful move and hints that investors are starting to position for a sooner than advertised interest rate hike.
Halyard’s Weekly Wrap – 10/08/21
/in Weekly Wrap/by halyardAt first glance the September unemployment report released on Friday looked wildly disappointing. It’s been described as “Disastrous” at several media outlets. Consensus was looking for 500,000 newly created jobs for the month, and to be honest, we would have taken the over on that bet. Instead the BLS reported that the economy generated 194,000 jobs for the period.
Halyard’s Weekly Wrap – 10/01/21
/in Weekly Wrap/by halyardFundamentals took a back seat to political in-fighting this week as the Republicans made it clear that they were going to do precious little to assist the Democrat’s goal of lifting the debt ceiling, keeping the government open for business, or passing Biden’s $3.5 trillion social stimulus. Interest rates moved higher across the curve as the uncertainty of fiscal policy spooked bond investors. The new 2-year note auction that was held on Monday was described by one pundit as “gruesome”, given the below average bid-to-cover ratio, and the yield at which it cleared, which was nearly a basis point above the yield asked at auction time. Following the auction, the yield-to-maturity of the 2-year note rose to 0.31%, before drifting back down to 0.266% to close out the week. That’s nearly double where the note traded last summer! Stocks fared worse, with the S&P 500 trading down about 2.5% for the week.
Halyard’s Weekly Wrap – 09/24/21
/in Weekly Wrap/by halyardWhile Chairman Powell and the Open Market Committee failed to signal a start to tapering open market purchases, they did inch closer. Powel described current economic condition as having mostly met the committees standard to begin to taper and suggested that an announcement would be made at the November meeting. Bond investors didn’t like the news and drove the yield on the 10-year note 15 basis points higher to end the week at 1.45%.
Halyard’s Weekly Wrap – 09/17/21
/in Weekly Wrap/by halyardEconomic data this week offered something for everyone. For those seeing the uptick in inflation as transitory, the Consumer Price Index data was not as bad as feared. The month-over-month CPI fell from 0.5% in July to 0.3% in August; arguably an improving trend, but still rising at an above target pace. The year-over-year rate also improved marginally falling from 5.4% in July to 5.3% in August. Again, right direction but still alarmingly high.
Halyard’s Weekly Wrap – 09/10/21
/in Weekly Wrap/by halyardWith the confluence of Labor Day on Monday and Rosh Hashana on Tuesday and Wednesday, we kicked off the week expecting a quiet one. Instead, corporations issued paper at a “break-neck” pace. For the week we saw 52 borrowers sell in excess of $76 billion in paper. Surprisingly, the large supply barely moved interest rates, as the 10-year Treasury note was less than 4 basis points higher for the week. The S&P 500 traded lower each successive day this week as forecasts for slowing economic growth dominated the headlines, but point-to-point the index was down approximately 1.00%. Hardly a correction!