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 – 09/03/21
/in Weekly Wrap/by halyardThe Bureau of Labor Statistics reported that the U.S. economy only added 235,000 new jobs is August. That was well below the anticipated 733,000 that was the consensus expectation. The immediate question is that number weak enough to convince the FOMC to postpone the tapering of open market purchases. Given the verbal jousting of the various Fed Presidents and Governors over the last few weeks, we conclude that the answer is a solid Maybe.
Halyard’s Weekly Wrap – 08/27/21
/in Weekly Wrap/by halyardPowell turned ever so mildly dovish in his comments to the virtual Jackson Hole Central Bank meeting on Friday. Despite a cadre of Central Bankers calling for an immediate halt to the open market purchases, the Chairman said the Open Market Committee is likely to commence tapering before the end of 2021. We believe the street had set up for more hawkish language, with some looking for an announcement that taper would begin in September. That was a foolish call! While the Fed doesn’t always look to the calendar in making policy announcements, the Chairman had to realize that doing so on the last Friday of August would rock the market. Instead Treasuries traded sideways which was enough to drive the S&P 500 to another record high.