rates fed: Rate Watch 8/15/2022 - 08/15/22 08:17 AM
Last week’s CPI report came in lower on a year-over-year basis at 8.5% (vs 9.1% the month before). The month-over-month increase was at 0%. I had a feeling this report would come lower than expectations and am hopeful that it will be the start of a trend.
A September rate hike will still occur, even if September CPI comes in lower. I think our best case scenario is that September follows a similar path as August’s CPI report with maybe a month-over-month decrease. Then we get a 50bp rate hike from the Fed.
This week, we hear from some Fed members and get the … (0 comments)

rates fed: Rate Watch 08/08/2022 - 08/08/22 10:16 AM
Last Friday’s unemployment report came in much stronger than expected (although I think part-time jobs had a big effect). It more than doubled expectations! Those wishing for lower rates were stung by this data as it provides gunpowder for the Fed to increase them.
It will also help support the argument that we are not in a “true” recession as most recessions had high unemployment rates. The unemployment rate fell back to pre-pandemic levels.
This week is another important one. We get our CPI numbers. As important as the unemployment numbers are when it comes to current Fed monetary policy, the CPI takes … (1 comments)

rates fed: Rate Watch 8/1/22 - 08/02/22 09:53 AM
Sorry for being a day late this week, I was celebrating my anniversary this weekend, so no work at all.
We have a little bit of a longer newsletter this week since we are coming off the back of the most important week of the year.
The first part of last week played out exactly as it did in the past when the Fed spoke. Monday and Tuesday were bad days for rates followed by a good day on Wednesday when the policy was announced and Powell spoke. Then, that was followed by a negative GDP report.
I’ll admit, I thought the numbers were … (0 comments)

rates fed: Weekly Rate Watch 7/24/2022 - 07/24/22 05:30 PM
It’s time for another Weekly Rate Watch where my goal is to help provide value to you and your clients when it comes time to talk rates. Should you ever have any questions at all, please do not hesitate in reaching out. I’m always here to help. Let’s begin!
We have the biggest week YTD coming up, economically speaking. The two events that will capture headlines are the Fed’s monetary policy decision along with Q2 GDP numbers.
The Fed was expected to raise rates by 50bp. That number has increased to 75bp which is current market expectations. However, coming off the back of 9.1% inflationary … (3 comments)

rates fed: Rate watch for week ending on 7/23 - 07/22/22 09:30 AM
So I wrote the rate watch for this week, but somehow it did not get posted. SO now we can look back and see if it met expectations. Ooops
The “official” reports showed inflation popping up to 9.1% and the market reacted in a very volatile way. The Fed is meeting next week to discuss monetary policy. Originally, the expectation was a 50bp increase. Due to 2 months of uncontrollable inflationary data, we can predict the new expectation to be 75bps and wouldn’t be surprised for a 100bp increase (due to 9.1% inflation), although that will rattle the equities markets.
We hear from … (0 comments)

rates fed: Rate Watch As the Second Half Begins - 07/11/22 08:38 AM
We saw rates pop last Friday. This was due to a strong jobs report. If there is strong economic data, the Fed will translate that data to mean the economy is doing well (and no need to fear a recession) and therefore more aggressive rate hikes to battle inflation are warranted. The markets will cheers to the bad news/data because that means the Fed won’t raise rates.
The unemployment data, however, does not consider everyone who is unemployed. For example, it only considers those that are not working but actively looking for work within the past 4 weeks (if you are unemployed … (3 comments)

rates fed: Happy 4th of July Rate Watch - 07/04/22 08:56 PM
Playing golf today so I’m going to keep this one short and sweet. We hear from some Fed presidents this week and receive some labor statistics.
In The News
Job Openings and Quits FOMC Minutes  
Initial and Continuing Jobless Claims St. Louis Fed President James Bullard Speaks Fed Gov. Christopher Waller Speaks at NABE Conference  
Unemployment Rate Labor Force Participation rate (ages 25-54)  
That’s it for this week. Next week we get inflation/CPI data.
Chart Check(see above)
We saw buyers reenter the bond market last week as they may be placing their bets already on MoM CPI numbers showing a decline in … (3 comments)

rates fed: Rate Watch - Almost Half Time For 2022 - 06/27/22 09:14 AM
The Fed has become more hawkish in its public stances. I said in an earlier newsletter that “soft landing” is for 2022 as “transitory” was for 2021. All made up for our entertainment.
The expectation for July used to be a 50bp hike. After the latest inflation report and hearing from the Fed members, I believe it will be more of a 75-100bp hike. There is no Fed meeting in August (they have their annual meeting at Jackson Hole) and will reconvene in September.
Inflation is the story at hand. Until the CPI numbers (the most important report these days) show a month-over-month … (3 comments)

rates fed: Rate Watch 6/20/22 - History Repeats Again - 06/20/22 10:41 AM
Happy Belated Father's Day!
As I expected, the Fed took the opportunity that the inflation numbers presented and raised rates by 75bps. During Fed Chairman Powell’s speech, he mentioned how he wanted to “moderate demand” because it was too high. This is something I have been talking a lot about: the Wealth Effect (recap: when asset prices go up, people feel wealthy and spend more and vice versa). The Fed believes that consumer spending is causing prices to increase (high demand with lower supply = price increase) and wants to “moderate” that demand. A crashing stock market and increasing fear are 2 … (2 comments)

rates fed: Rate Watch 6/13/22 - Yikes! - 06/13/22 08:55 AM
In The News
The story that is controlling the media right now is inflation. Friday’s numbers showed inflation came in higher than expected and at a new 40-year high. The markets reacted accordingly: a stock market sell-off and mortgage rate increases. The problem now is that this opens the door for the Fed to do a 75bp rate hike this week (a 50bp hike is expected). A 75bp hike will essentially double the rate to 1.5%. If there was ever a time for the Fed to do a surprise hike/increase, now is the time.
Although the short-term volatility will be chaotic (remember, I said … (3 comments)

rates fed: Weekly Rate Watch 6/6/2022 - 06/06/22 11:14 AM
In The News
The world will be watching CPI numbers released Friday. During last month’s report, we saw a dip in year over year inflation but the month over month still grew, albeit slowly. If this next report shows a decrease in rate month over month, the markets will bet that inflation has peaked and we should see a nice breather in rates.
Foreign Trade Balance 
10yr Treasury Auction 
Initial and Continuing Jobless Claims ECB rate decision  
CPI numbers MoM & YoY 5 Yr Inflation Expectations Federal Budget Balance  
Chart Check (see above)
We had a great little breather 2 weeks ago and last … (2 comments)

rates fed: Rate Watch End Of May - 05/31/22 12:14 PM
Atlanta Fed President Bostic said on Monday that he wouldn’t be surprised if the Fed paused its rate hikes in September. Originally, the Fed planned for 10 rate hikes in 2022 for a total of 300bps. They have done 75 so far, but with Fed members already talking about pauses, the ambitious rate hike goals seem unlikely.
We have midterm elections coming up and it’s possible the Fed creates a mini bull run in the stock market to assist some candidates. I’ve always held the view that the Fed will decrease rates in time for the Biden re-election campaign, but midterm ones … (1 comments)

rates fed: Rate Watch 5/22/22 - 05/22/22 07:13 PM
Last week Fed Chairman Powell announced how the Fed will do whatever is necessary to battle inflation. He also keeps referring to his admiration of Fed Chairman Paul Volcker, who famously increased interest rates to near 20% levels in order to battle inflation. This ultimately helped battle inflation but also was credited for sending unemployment to double digits and adding fuel to the recession that occurred in the early 1980s. The Fed’s 50bp rate hike is nothing compared to what Volcker did, but the Fed has laid out plans to increase rates a total of 10 times this year. Powell’s jawboning … (1 comments)

rates fed: Weekly Rate Watch - Rhetoric Rules - 04/18/22 09:17 AM
Last week started off with a rough Monday but then markets rejoiced when CPI numbers came out Tuesday. Even though CPI inflation numbers came in at 8.5%, slightly higher than expectations, the markets dug into the month-over-month increase of a little over 6% and saw the month-to-month inflationary momentum slowing. Some participants were led to believe that inflation has peaked. I don’t think this is true and the markets responded accordingly the next few days which led us to a worsening reprice.
I’ll be very surprised if inflation has peaked. However, it is more important to study the market’s reaction. I said … (0 comments)

rates fed: Rate Watch 4/11/2022 - 04/11/22 09:23 AM
Chart Check (see above)
Don't blame the messenger
We continue to live in our downtrend channel. We may push the boundaries of resistance/support a little bit, but I expect the downtrend to continue for now (especially as the Fed “plans” to unload the balance sheet). I haven’t spoken about the 50 and 200 DMA in a little while but wanted to show how there is no indication of the 50 DMA (black line) crossing over the 200 DMA (blue line). Remember, when the 50 DMA crosses over the 200 DMA from below to on top, that is a bullish (lagging) indicator and we … (1 comments)

rates fed: Rate Watch - The "Excitement" continues - 04/04/22 09:58 AM
 "Our biggest challenge today is completing homes, not selling them, as demand continues to be robust." – Jeff Kaminski, CFO KB Homes
Let's GO!
We have the potential for a volatile 2 week period ahead of us. This week, we hear from a lot of Fed members ahead of next week’s (4/11 & 4/12) inflation data. The markets will be weighing every word closely this week. For the inflation data after, we just need to see things go from bad, to less bad, in order to see a positive reaction in the bond markets. Investors will be trading the turning tides of the trend, … (1 comments)

rates fed: Weekly Rate Watch - Good Riddance to March - 03/27/22 06:43 PM
“There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level” – Fed Chairman Jerome Powell
Hi All!
As I expected, the Fed continued with a quarter-point hike in rates. The markets expected that. Last week I said his outlook would weigh more than the actual rate hike. Powell’s outlook was much more hawkish than the markets wanted. The quote above references how they will need to be more aggressive with rate hikes to battle inflation. Whether that happens or not is yet to be seen. I did mention in a previous newsletter how the … (2 comments)

rates fed: Rate Watch Roller Coaster - 03/14/22 08:37 AM
“We’re likely to see another year in which 12-month inflation numbers remain uncomfortably high.” – US Treasury Secretary Janet Yellen
I expect massive volatility this week as the war with Russia and Ukraine continues. A few stories have developed this past weekend.
Russia has asked China for assistance with military equipment and aid, along with economic purposes. If China agrees to support Russia, expect mass market volatility.  
“We are communicating directly, privately to Beijing that there will absolutely be consequences for large-scale sanctions evasion efforts or support to Russia to backfill them” – Jake Sullivan, White House National Security Advisor
Iran led a missile attack that struck Erbil, … (19 comments)

rates fed: Rate Watch, War Edition 3/7/22 - 03/07/22 08:38 AM
Last week I made two calls that are playing out sooner than I expected. The calls:
1) The Fed will hesitate to raise rates during a war and
2) there is no way they will raise them the 6-7 times they’ve announced for the 1.5-1.75pt minimum rate hike increase
Fed Powell confirmed those 2 calls in one statement. They will increase rates by a quarter-point this month (instead of the 50bp hike markets were expecting) and cited the war as a concern. The problem the Fed has is that inflation is 3-4 times their target of 2%. Powell did mention that they will try … (2 comments)

rates fed: 2/28/22 Rate Watch- Some Hope for Moderation - 02/28/22 08:04 AM
“The interest on the public debt for fiscal year 2021 is estimated to be $413 billion, according to the Congressional Budget Office”
This essay is a little longer. Hope you enjoy it.
As easily predicted, the war in Ukraine has captured headlines. Regardless of one’s views, if the war spreads or worsens, that will cause volatility in the markets. If a dash for cash occurs with investors, everything is in trouble. If money stays in the market but moves from risk-on assets to risk-off, bonds win and rates should decrease. It should be difficult for the FED to raise rates if the war spreads … (0 comments)





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