Today - Sunday, February 1, 2015
- President Obama will ask for a 1.3% pay increase for federal employees and uniformed soldiers in fiscal 2016 as part of his budget request set for release on Monday, government sources say.
- A 1.3% increase would exceed the 1% bump given the past two years, but falls short of a bill proposed by Rep. Don Beyer and more than 30 other congressional Democrats that would give federal workers a 3.8% raise in fiscal 2016 to keep pace with cost of living increases.
Friday, January 30, 2015
- Not a voter on the FOMC this year, St. Louis Fed boss Jim Bullard stays hawkish, telling Bloomberg "I'd rather get off zero sooner ... and then react to data."
- It's reasonable, he says, to expect a rate hike in June or July. Maybe unreasonable then are interest rate futures markets which are currently aren't pricing in a 25 basis point tightening until October. Maybe reasonable and maybe not, the 10-year Treasury yield continues to fall, now off eight basis points on the session to 1.67%.
- Previously: Yellen leans dovish in private chat (Jan. 29)
- Previously: Long-term Treasury yields lower after soft GDP print (Jan. 30)
- ETFs: SHY, IEF, PST, IEI, TYO, DTYS, BIL, UST, STPP, VGSH, VGIT, SHV, FLAT, TBX, SCHO, GSY, SCHR, DTYL, TYD, ITE, DTUS, SST, DTUL, DFVL, TUZ, TBZ, FIVZ, DFVS, TYNS, SYTL
- The 10-year Treasury yield has ducked under 1.70% for the first time in nearly two years following the softer-than-hoped preliminary read on GDP growth (2.6% vs. 5% in Q3, and forecasts for 3%). It's now off six basis points to 1.69%.
- In Germany, 30-year government paper now carries a yield of less than 1% for the first time ever. The 10-year Bund is at 0.30%.
- TLT +1%, TBT -2% premarket
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, TENZ, LBND, TYBS, DLBL, BUNL, GGOV, BUNT
- According to figures released by the U.N. Conference on Trade and Development, China became the world’s top destination for foreign direct investment in 2014, edging the U.S. out of that position for the first time in more than a decade.
- Foreign businesses invested $127.6B in China last year, up from $123.9B in 2013, while their investments in the U.S. fell to $86B from $230.8B.
- The U.S. also slipped behind Hong Kong, falling into third place among all FDI recipients.
- ETFs: FXI, EWH, KWEB, PGJ, YINN, GXC, FXP, ASHR, HAO, TAO, YANG, CHIQ, CQQQ, CHIX, MCHI, QQQC, PEK, XPP, YAO, YXI, CHXF, ECNS, FCA, CHII, CN, CHIE, CHIM, EWHS, FCHI, ASHS, KFYP, CNXT, CHNA, KBA, FHK
Thursday, January 29, 2015
- Maybe helping stocks along to what's become a sizable rally, Fed boss Janet Yellen - apparently in a private meeting with Congressional Democrats - told the group the economy has a ways to improve and that no rate hike is imminent.
- Those thoughts could be taken to be at least slightly in contrast to the FOMC statement from yesterday which highlighted strength in the job market and the economy, and that a rate hike could come as soon as June.
- Given the history, did those inside the closed-door meeting do some buying before Charles Schumer made Yellen's thoughts public?
- The DJIA (DIA +1.2%) is now higher by 230 points.
- ETFs: DIA, DOG, DXD, UDOW, SDOW, DDM
- Comparing the U.S. economy to the game of Monopoly, Bill Gross says capitalism depends on those with capital hoping they can earn a positive return, and that by holding rates too low for too long, the Fed has crushed that hope.
- The central bank, however, has begun to recognize the distortions it's created, and will begin hiking "the Monopoly board's interest rates" late this year, "hoping to avoid landing on the figurative Park Place and Boardwalk in the process."
- "Bonds, despite their ridiculous yields, will not be easily threatened with a new bear market."
- Investment Outlook
- ETFs: AGG, BND, BOND, SCHZ, LAG, SAGG, GBF, FBND, IUSB, VBND
- Mortgage rates rose slightly in the past week, according to Freddie Mac's latest survey, following positive reports on new home sales and existing home sales.
- The 30-year fixed-rate mortgage averaged 3.66%, up from a 20-month low 3.63% in the prior week, while the 15-year fixed-rate mortgage averaged 2.98%, up from 2.93% a week ago.
- A year ago, the 30-year and 15-year rates averaged 4.32% and 3.40%, respectively.
Wednesday, January 28, 2015
- The 10-year Treasury yield sinks all the way to 1.75% following the FOMC statement which shows the central bank continuing on a path to rate hikes around mid-year. TLT +0.95%, TBT -1.9%
- Yields at the short end aren't moving a lot and continue to price in a 25 basis point hike by the fall.
- Stocks remain modestly higher, but financials (XLF -0.6%) - contemplating an even flatter yield curve - continue to underperform. KBE -1.1%, KRE -1.2%
- Indirect bidders took down nearly 50% of today's $25.7B two-year Treasury note auction, with direct bidders winning 8.8% of the notes vs. a recent 16%. The bid-to-cover ratio of 3.74 stands against the average of 3.40 over the last four auctions.
- The two-year yield slipped to 0.51% after the auction vs. 0.515% earlier in the session.
- Treasury auction results
- Citing "solid" growth and "strong" job gains, the FOMC shows no sign of backing away from its near-pledge for a mid-year rate hike, but does say it can be "patient" - code for nothing coming in the next two policy meetings and thus meaning June would be the earliest date for tightening.
- As for inflation, it's expected to decline further in the near term, but then rise back towards the 2% target as the labor market strengthens and the transitory effects of lower energy prices dissipate.
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