Tag Archive: Interest rates

The End Game Approaches

The pendulum of market sentiment swings dramatically.  It has swung from nearly everyone and their sister complaining that the Federal Reserve was lagging behind the surge in prices to fear of a recession.

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Market Pulse: Mid-Year Update

Note: This update is longer than usual but I felt a comprehensive review was necessary. The Federal Reserve panicked last week and spooked investors into the worst week for stocks since the onset of COVID in March 2020. The S&P 500 is now firmly in bear market territory but that is a fraction of the pain in stocks and other risky assets.

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Fed 50, BOE 25, and the BOJ to Stand Pat: Week Ahead

Three G7 central banks meet in the coming days, and they dominate the macro stage. The Federal Reserve's meeting concludes on Wednesday, the Bank of England on Thursday, and the Bank of Japan on Friday.

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Weekly Market Pulse: Is The Bear Market Over?

Stocks had a rip snorter of a rally last week and a lot of people are pondering the question in the title over this long weekend. The S&P 500 was down 20.9% from intraday high (4818.62, January 4th) to intraday low (3810.32, May 20th). From that intraday low the market has risen 9.1% in just six trading days.

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Weekly Market Pulse: TANSTAAFL

TANSTAAFL is an acronym for “There ain’t no such thing as a free lunch”. It has been around a long time – Rudyard Kipling used it in an essay in 1891 – but it was popularized by Robert Heinlein’s 1966 book, “The Moon is a Harsh Mistress”.

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Peak Inflation (not what you think)

For once, I find myself in agreement with a mainstream article published over at Bloomberg. Notable Fed supporters without fail, this one maybe represents a change in tone. Perhaps the cheerleaders are feeling the heat and are seeking Jay Powell’s exit for him?

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The Week Ahead: US CPI and PPI Set to Soften

The Fed's 50 bp rate hike is behind us.  Another 50 bp hike is expected next month. The April employment report will do little to calm the anxiety about the "too tight" labor market. 

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What Really ‘Raises’ The Rising ‘Dollar’

It’s one of those things which everyone just accepts because everyone says it must be true. If the US$ is rising, what else other than the Federal Reserve. In particular, the Fed has to be raising rates in relation to other central banks; interest rate differentials.

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Yen Blues

Benchmark 10-year bonds yields in the US and Europe are at new highs for the year.  The US yield is approaching 2.90%, while European rates are mostly 5-8 bp higher.  The 10-year UK Gilt yield is up nine basis points to push near 1.98%. The higher yields are seeing the yen's losing streak extend, and the greenback has jumped 1% to around JPY128.45  The dollar is trading lower against the other major currencies but the Swiss franc.

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Weekly Market Pulse: What Now?

The yield curve inverted last week. Well, the part everyone watches, the 10 year/2 year Treasury yield spread, inverted, closing the week a solid 7 basis points in the negative. The difference between the 10 year and 2 year Treasury yields is not the yield curve though. The 10/2 spread is one point on the Treasury yield curve which is positively sloped from 1 month to 3 years, negatively sloped from 3 years to 10 years and positively sloped again...

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Yields Jump, Greenback Bid

Overview: Yields are surging.  Canada and Australia's two-year yields have jumped 20 bp, with the US yield up 10 bp to 2.37% ahead of the $50 bln sale later today.  The US 10-year yield has risen a more modest three basis points to 2.50%, flattening the 2-10-year yields curve.  The 5–30-year curve has inverted for the first time since 2016. 

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Weekly Market Pulse: Is This A Bear Market?

I don’t know the answer to the question posed in the title. No one does because the future is not predictable. I don’t know what will happen in Ukraine. I don’t know how much what has already happened there – and what might – matters to the US and global economy. I don’t know if the Fed is making a mistake by (likely) hiking interest rates by an entire 1/4 of 1% this week.

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Weekly Market Pulse: Oil Shock

Crude oil prices rose over 25% last week and as I sit down to write this evening the overnight futures are up another 8% to around $125. Almost every other commodity on the planet rose in prices last week too, as did the dollar. Those two factors – rising dollar and rising commodity prices – mean the likelihood of recession in the coming year has risen significantly in just the last week.

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Weekly Market Pulse: Are We There Yet?

I’ll just get this out of the way right at the beginning. The question in the title of this post refers to the end of the ongoing stock market correction and the answer is likely no. There are no sure things in this business so it isn’t an unequivocal no, but based on history, the odds favor more weakness.

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After Today’s FOMC, Yield Curve Is Already As Flat As It Was In Mar ’18 **Without A Single Rate Hike Yet**

It’s not hard to reason why there continues to be this conflict of interest (rates). On the one hand, impacting the short end of the yield curve, the unemployment rate has taken a tight grip on the FOMC’s limited imagination. The rate hikes are coming and the markets like all mainstream commentary agree that as it stands there’s nothing on the horizon to stop Jay Powell’s hawkishness.

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Weekly Market Pulse: Fear Makes A Comeback

Fear tends to manifest itself much more quickly than greed, so volatile markets tend to be on the downside. In up markets, volatility tends to gradually decline.

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Weekly Market Pulse: A Very Contrarian View

What is the consensus about the economy today? Will 2022 growth be better or worse than 2021? Actually, that probably isn’t the right question because the economy slowed significantly in the second half of 2021. The real question is whether growth will improve from that reduced pace.

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Weekly Market Pulse: Discounting The Future

The economic news recently has been better than expected and in most cases just pretty darn good. That isn’t true on a global basis as Europe continues to experience a pretty sluggish recovery from COVID. And China is busy shooting itself in the foot as Xi pursues the re-Maoing of Chinese society, damn the economic costs.

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This Is A Big One (no, it’s not clickbait)

Stop me if you’ve heard this before: dollar up for reasons no one can explain; yield curve flattening dramatically resisting the BOND ROUT!!! everyone has said is inevitable; a very hawkish Fed increasingly certain about inflation risks; then, the eurodollar curve inverts which blasts Jay Powell’s dreamland in favor of the proper interpretation, deflation, of those first two.

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Euro and Sterling Record New Lows for the Year

Overview: The capital markets remain unsettled.  The US CPI with a 6%-handle has lifted bond market volatility, disrupted rallies in stocks, and extended the dollar's rally.   Small gains in the US S&P 500 and NASDAQ yesterday and a better news stream from China helped lift Asia Pacific equities today.  Benchmarks in Japan, South Korea, and India rose more than 1%.  Europe's Stoxx 600 is struggling as energy, health care, and utilities are...

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