Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
02/27/26 –
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”. – Chuck Prince, CEO Citigroup – July 2007
There were opposing stories driving the capital markets this week with news of a continued deterioration in the private credit space being offset by a continued flow of cash into the fixed income market.
The latest credit blowup is the U.K. based Market Financial Solution Ltd. Like the high-profile collapses of First Brands Group and Tricolor Holding last year, MFS appears to be guilty of using the same collateral for multiple loans resulting in what is said to be an approximately GBP 930 million shortfall. While not enough to cause a systemic panic, the loss has again brought the topic of questionable credit practices to the fore, and with it the riskiness of private credit.
Despite that concern, the investment grade fixed income market continues to see heightened demand, especially in the short end of the yield curve. The demand for short paper pushed the 2-year note to a fresh low of 3.38%, which is somewhat perplexing given that one-month Treasury Bills offer a rate of 3.67%. Typically, the logic behind an inverted 2-year note is the expectation that the overnight rate is going to fall precipitously, such that the rate earned over the 2-year holding period would exceed that earned by rolling Treasury Bills. With the unemployment rate seeming to stabilize, inflation no longer falling, and corporate earnings continuing to grow at a healthy pace, we don’t think that’s likely. While Fed Fund futures are pricing in more than two 25 basis point rate cuts by next year, we think at most we’ll see only a single cut.
Of the secondary economic data released this week the Chicago PMI business conditions index stood out. The index registered 57.7 at the last reading, well above the 37.3 low touched in November 2025. Could it be that businesses are becoming more confident? We will watch the other confidence measures to see if they show improvement as well.
Economic data to be released next week includes the Retail sales measure for January, which is expected to be flat versus the prior month, and non-farm payrolls for February – which is expected to show a gain of 60,000 new jobs for the month.
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 – 3/22/24
/in Weekly Wrap/by halyardAs expected, the FOMC left the Fed Funds corridor unchanged on Wednesday. Mildly surprising to us though, their economic forecast continues to indicate that they expect to cut the overnight rate three times this year. As we’ve written on numerous occasions, the job market remains robust, and the consumer price index has stabilized at the mid-3% level, well above the Fed’s stated target. The question being asked, is there an imminent threat to economic growth that the Fed is aware of, but the rest of the investing community is not? Especially since a popular financial conditions indicator, which aggregates broad financial conditions such as interest rates, equity prices, and credit spread is showing that financial conditions have eased since last fall. Why then is the Fed threatening to ease policy?
Halyard’s Weekly Wrap – 3/15/24
/in Weekly Wrap/by halyardThe bullish tone on which the bond market closed last week has completely reversed and is closing this week with a decidedly bearish resolve. The hope had been that the inflation measures this week would show further progress toward the Fed’s 2% target. That didn’t happen. Instead, the Consumer and Producer price indices both moved higher on a month-over-month basis in February. The core CPI index was 0.4% higher than the January measure, rounding to roughly 5.0%, a far cry from the Fed’s target.
Halyard’s Weekly Wrap – 3/8/24
/in Weekly Wrap/by halyardAt first glance the employment report for February was surprisingly strong. The expectation was that the economy would add 200,000 new jobs, up from an expected 188,00 last week. The actual change in payroll was 275,000. The year-over-year change in average hourly earnings was 4.3%, 0.1% lower than it registered last month but still an impressive uptick.
Halyard’s Weekly Wrap – 3/1/24
/in Weekly Wrap/by halyardThis week proved disappointing in that each day was jammed with economic data and a parade of Fed speakers and the market barely budged. After last week’s range-bound trading we felt certain that interest rates would break out of their recent band. The best that traders could manage was a rally in the 2-year note taking the yield-to-maturity of that issue down to 4.53%, the lowest yield in nearly three weeks.
Halyard’s Weekly Wrap – 2/23/24
/in Weekly Wrap/by halyardThis was a quiet week for the fixed income market, with the entire yield curve closing within a few basis points of last Friday’s close. The only real action came between late Wednesday afternoon into today’s close, as investors digested the minutes of the January FOMC meeting. As expected, the minutes echoed Chairman Powell’s post-meeting press conference comments that communicated that a rate cut was not imminent. That was enough to push the long bond up to 4.48%, the highest yield so far this year. Contributing to the rise was initial claims for unemployment insurance which totaled 201,000 for the week. That was the second lowest tally of 2024 and further evidence that the economy is not poised to enter a recession. But that wasn’t enough to offset dip-buying on Friday. On the week, the 30-year bond closed six basis-points lower, finishing at 4.37%.
Halyard’s Weekly Wrap – 2/16/24
/in Weekly Wrap/by halyardIn last week’s wrap we cautioned that despite the core PCE deflator touching the Fed’s target, there was a risk that the CPI wouldn’t show the same improvement. Economists had forecasted that the consumer inflation measure would rise to 3.9% year-over-year. That’s exactly where it was reported, and the month-over-month core registered 0.4%. Despite matching the forecast, traders seemingly weren’t prepared for that result because yields across the curve skyrocketed. Obviously, the report took the possibility of an early Fed rate cut off the table. Fed fund futures are now indicating that the first cut has been pushed off to this summer. The 2-year note, which had traded as low as 4.14% last month, shot up to 4.65% on the news, before closing the week half of a basis point higher at 4.655%. The inflation news also took the “wind out of the sails” of the equity market, with the S&P 500 plunging 68 points by the close of business on Tuesday. That entire move has been erased though, with the index closing roughly unchanged for the week.