Moving On Up Volatility ticked back up in February as higher-than-expected inflation data and a surprisingly strong jobs report supported the Fed’s case for “higher for longer”. The policy sensitive 2-year Treasury has jumped over50bps and the 10-year Treasury has increased more than 40bps since the beginning of the month. As expected, the Fed hiked the policy rate 25bps on February 1st, bringing fed funds to the 4.50%-4.75% range. This…
US consumer prices accelerated 0.5% in January after gaining 0.1% in December. Headline CPI increased at a 6.4% annual pace last month, which was slightly above expectations of 6.2% but a decline from December. This marked the seventh straight month of declines since the index peaked at 9.1% in June. The shelter index, which accounts for over 44% of the CPI, is up 7.9% over the past year. While we…
Hard to believe 2022 is already coming to an end! It has been an interesting year to say the least. Inflation proved to not be transitory, Russia and Ukraine went to war, the Fed executed the most aggressive start to a tightening cycle in decades, US equities plummeted 18%+ on the year… We are in a period of radical uncertainty. As PIMCO describes it, “uncertainty [that] can’t be qualified by…
For the record. The Fed has delivered the most aggressive start to a tightening cycle on record, with 375bps of rate hikes in the last 8 months, but the full impact has yet to be felt. As we’ve previously discussed, rate hikes take 9-12 months to filter through the system, and the Fed has certainly front-loaded the hikes. So where does the Fed go from here? For reference, the 2004-2006…
More of the same. We decided to delay releasing the October update a week to include last week’s Fed meeting and jobs report, as October was more of the same. The theme of volatility/uncertainty continued throughout the month as rates grinded about 35bps higher across the curve. The job market remains solid, and inflation continues to run stubbornly high, with both CPI and PPI coming in over 8% on…
Higher for longer. Rates continued to increase this month across the curve as traders embraced the Fed’s message of “higher for longer,” which they have been repeating consistently all month. The policy sensitive 2T increased 70bps to roughly 4.15%, while the 10T increased about 55bps to 3.74%. Volatility remains elevated as rates have swung significantly on their march higher. The 10T increased 25bps, then retraced 25bps, all in the…
On the grind. Rates grinded 50bps+ higher across the curve this month as policymakers from the world’s biggest central banks reaffirmed the need for tighter monetary policy to bring down stubbornly inflation. While much of the economic data has come in weaker than expected, with Retail Sales flat and home sales down last month, some of the most significant data came in stronger than anticipated. The jobs report for July…
What is a recession? Could the “official” definition of a recession be any more subjective? Keep in mind that we are only in a recession when the National Bureau of Economic Research says so. This is the same organization that announced at the end of 2008 that we entered a recession a year earlier in Dec 2007. As we discussed last month, the widely used definition of a recession is…
No easy answers for the Fed. Rates across the curve moved 10-15bps lower for the month, ending May with the 2T at 2.56% and the 10T at Equities continue to get hammered (7% down this month!), the Fed hiked rates 75bps (the single largest rate hike in over 25 years!), and headline inflation came in at 8.6% (highest in 40+ years!). Inflation is being driven by a myriad of factors:…
Too soon to tell. Rates across the curve moved 10-15bps lower for the month, ending May with the 2T at 2.56% and the 10T at 2.85%. Inflation has moved slightly lower over the past couple of months, with Core PCE at 5.2% for March and 4.9% in April (year-over-year). While we are finally seeing a slight improvement in inflation, we will need further downward movement before confidently claiming we’re past…