Sep. 17, 2014, 2:16 PM
- There's little news from the FOMC policy statement (other than two dissents instead of one), but there's a bit more action in the economic projections and the "dots."
- The projection for 2015 GDP growth is cut somewhat, but so is the forecast unemployment rate, now at a range of 5.4-5.6% from 5.4-5.7%. The high end of the core PCE inflation forecast is cut, now 1.6-1.9% from 1.6-2.0%.
- 11 out of 17 FOMC members now see the Fed Funds rate at above 1% by the end of 2015. Four of the group see Fed Funds at about 4% by the end of 2016.
- The bond market is selling off on what could be argued to be a more hawkish lean to the policy statement and projections. The 10-year Treasury yield - at about 2.56% ahead of the release - is up to 2.60% at the moment. TLT +0.35%
- More sensitive to short rate, the 3-year yield jumps about 7 basis points to 1.1%.
- Janet Yellen's press conference begins at 2:30 ET.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, DLBS, VGLT, UBT, TLO, TENZ, LBND, TYBS, DLBL, SHY, IEF, PST, IEI, TYO, DTYS, BIL, UST, VGIT, SHV, VGSH, TBX, SCHO, GSY, SCHR, DTYL, TYD, ITE, DTUS, SST, DTUL, TUZ, DFVL, TBZ, FIVZ, DFVS, TYNS
Sep. 12, 2014, 3:46 PM
- There's a 40% chance "considerable time" - as in "Fed Funds will stay near zero for a considerable time" - is dropped from the FOMC policy statement next week, says Citi's Steven Englander.
- This would be a "major hawkish step," says Englander, and even were it to be replaced by "data dependent," it opens to door for a rate hike prior to current market expectations for mid-2015.
- Markets also should be prepared for a hawkish shift in the "dots," though this would be secondary to the possible change in language, says Englander.
- Previously: BofA moves up forecast of first rate hike by 3 months
- ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUS, SST, DTUL, TUZ
Sep. 12, 2014, 7:34 AM
- The first Fed rate hike will occur in June of next year, not September as earlier forecast, says the team at Bank of America. Over the 18 months following, BofA sees rate hikes at every other Fed meeting and a peak Fed Funds rate of 4%.
- Why the changed forecast? Growth and inflation data have been stronger than the bank expected, and booming asset markets alongside falling long-term bond yields have triggered a "re-engagement of the banking system."
- Also seen is a gradual change in rhetoric from Janet Yellen, and the bank expects an imminent change to the Fed's long-used phrase of rates at zero for a "considerable time."
- ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUS, SST, DTUL, TUZ
Sep. 10, 2014, 8:58 AM
- "It's almost comical" that experts continue to forecast rising rates, says Jeff Gundlach. The downgrade of GDP forecasts has now become an annual event, yet "hope springs eternal" that 3% growth is just around the corner.
- Look no further than housing, says Gundlach, for what's holding the economy back. There's a secular trend at play as demographics continue to force a shift away from home ownership, and the cyclical action of rising home prices will just accelerate this.
- Earlier, the MBA reported mortgage application volume fell 7.2% last week, bringing the MBA index to its lowest level since December 2000. Refinance volume fell 11% to its lowest level since Nov. 2008, and purchase volume fell 3% on the week, and 12% from a year ago.
- The purchase print is especially troubling, says Diana Olick, as all-cash institutional buyers are moving out of the market, leaving mortgage-dependent buyers to pick up the slack.
- The 10-year Treasury yield is higher by two basis points to 2.53%.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, UBT, VGIT, SHV, PLW, GOVT, VGSH, TLO, TBX, SCHO, GSY, SCHR, TENZ, DTYL, TYD, ITE, LBND, DTUS, SST, TYBS, TUZ, DLBL, DTUL, TBZ, DFVL, FIVZ, DFVS, TYNS, TAPR
Sep. 5, 2014, 11:40 AM
- The FOMC's July policy statement noted "significant underutilization of labor resources," reminds Jon Hilsenrath. With today's nonfarm payroll report showing unemployment the same in August (6.1%) as it was at the time of the July meeting, the Fed won't need to make big changes when it puts out this month's statement.
- Under debate at the Fed is whether to change its assessment of labor market slack, and it's a back-and-forth likely to go for another few months. When the committee no longer sees "significant underutilization," it will be a signal interest rates are close to rising. Also of note: The broader U-6 unemployment rate fell to 12%, but it was 8.8% when the recession started.
- A check of short-term rate futures finds them modestly higher and pricing in a 25 basis point rate hike by July of 2015.
- Short-duration Treasury ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUS, SST, TUZ, DTUL
- Previously: Treasury yields slide following jobs miss
Sep. 5, 2014, 4:47 AM
- U.S. data released today is expected to show steady job growth, rising in August to 225K from 209K in July, and a slight drop in the unemployment rate to 6.1% from 6.2%.
- Adding to the ECB's move for a new securities purchase program and cutting its key rates, highlighting an improved labor market will spur debate as to whether the Fed will step back from its commitment to keep rates low for a "considerable period" or hang on to its current policy due to a weak global economy.
- ETFs: TBT, TLT, UUP, TMV, UDN, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, TYO, DLBS, DTYS, FORX, VGLT, UDNT, BIL, UUPT, UST, UBT, STPP, SHV, VGIT, PLW, VGSH, TLO, GOVT, FLAT, TBX, SCHO, USDU, GSY, SCHR, TENZ, DTYL, TYD, ITE, LBND, DTUS, SST, TYBS, DTUL, DLBL, TUZ, TBZ, FIVZ, DFVL, DFVS, TYNS, USFR, TFLO, TAPR
Sep. 2, 2014, 10:12 AM
- New Orders of 66.7 is a 3.3 point rise from July's level, and the highest read for that subindex since April 2004. Production of 64.5 also rises 3.3 points in August.
- Employment 58.1 vs. 58.2; Supplier Deliveries 53.9 vs. 54.1; Inventories 52 vs. 48.5; Prices 58 vs. 59.5; Backlogs 52.5 vs. 49.5.
- "Business is strong. Labor is becoming a difficult issue," says a respondent in the Furniture & Related Products industry. From a respondent in Primary Metals: "Strongest month in years. Business is solid...Awesome!"
- Previously: ISM Manufacturing Index rises to 59 in August
- Full report
- Already lower on the session, Treasury prices decline a bit further, with the 10-year yield now higher by six basis points to 2.40%. TLT -1.4%, TBT +2.6%.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, TYO, DLBS, VGLT, BIL, UST, UBT, PLW, SHV, VGIT, VGSH, TLO, GOVT, TBX, SCHO, GSY, TENZ, SCHR, DTYL, TYD, ITE, LBND, DTUS, SST, TYBS, TUZ, DLBL, DTUL, TBZ, DFVL, FIVZ, DFVS, TYNS, TAPR
Sep. 2, 2014, 7:34 AM| Comment!
Aug. 25, 2014, 7:58 AM
- The FRBNY has been polling hedge funds and asset managers since the start of the year to gauge their expectations for the commencement of Fed rate hikes, and the latest survey - conducted before the Fed's end-of-July policy meeting - shows 41% expect a higher Fed Funds rate before the end of June 2015. That's notably higher than the 31% who though so before the Fed's June meeting and from 25% at the start of the year.
- Checking a more real-time gauge, the July 2105 30-day Fed Funds futures contract is at 99.66, suggesting a Fed Funds rate 25 basis points higher than it currently stands.
- Short-term Treasury ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUS, SST, TUZ, DTUL
Aug. 21, 2014, 12:04 PM| Comment!
Aug. 21, 2014, 10:14 AM
- As high as 2.45% earlier this morning, the 10-year Treasury yield is now lower by two basis points on the session to 2.41% despite a more than 4-year high in the Flash Manufacturing PMI, a 3 1/2-year high in the Philly Fed Business Outlook, and Existing Home Sales rising past expectations in July.
- TLT +0.2%, TBT -0.4%
- A check of Eurodollar futures finds the first Fed rate hike being priced in for next Spring.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, TYO, DLBS, VGLT, BIL, UST, UBT, SHV, VGIT, TLO, VGSH, TBX, SCHO, GSY, SCHR, TENZ, DTYL, LBND, TYD, ITE, DTUS, TYBS, SST, DTUL, DLBL, TUZ, TBZ, DFVL, FIVZ, DFVS, TYNS
Aug. 20, 2014, 2:15 PM
- The 10-year Treasury yield adds another basis point following the FOMC minutes, now ahead 2.5% bps on the session to 2.43%. Looking at a rate more sensitive to Fed policy, the 5-year note yield jumps 4.5 bps to 1.625%.
- The minutes show many committee members believing the labor market is improving faster than anticipated across a whole range of indicators, and the time is getting near for when it can no longer be described as underutilized.
- TLT -0.4%, TBT +0.8%
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, DLBS, TYO, VGLT, BIL, UST, STPP, UBT, PLW, SHV, VGIT, TLO, GOVT, FLAT, VGSH, TBX, SCHO, GSY, TENZ, SCHR, DTYL, LBND, ITE, TYD, DTUS, TYBS, SST, TUZ, DTUL, DLBL, TBZ, FIVZ, DFVL, DFVS, TYNS, TAPR
Aug. 14, 2014, 3:04 PM
- "The end of 2015 Q1 is still my preferred liftoff date," St. Louis Fed chief Jim Bullard tells the WSJ. A March rate hike is well ahead of the H2 timetable being signaled by Janet Yellen and the broader FOMC, but Bullard says the Fed is now closer to its twin goals of 2% inflation and low unemployment than had been previously expected.
- Investors should fear the Fed falling behind the curve on inflation, he says, as "that's certainly been the history of the institution."
- Fearing no such falling behind the curve at the moment, the 10-year Treasury yield continues at a 15-month low of 2.40%.
- ETFs: SHY, BIL, SHV, VGSH, SCHO, SST, DTUS, DTUL, TUZ
Aug. 8, 2014, 7:25 AM
- Macro concerns trump Fed hawkishness as the 10-year Treasury yield falls another five basis points to 2.37%, its lowest since June of 2013. The yield on the long bond is down four basis points to 3.20%.
- In shorter maturities, the 5-year note is down four bps to 1.56%.
- A check of Eurodolloar futures finds them higher, but still predicting the first rate hike by next June.
- TLT +0.5% premarket
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, PST, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, TYO, DLBS, VGLT, BIL, UBT, UST, SHV, VGIT, TLO, VGSH, TBX, SCHO, GSY, SCHR, TENZ, DTYL, LBND, ITE, TYD, DTUS, SST, TYBS, DLBL, DTUL, TUZ, TBZ, DFVL, FIVZ, DFVS, TYNS
Aug. 1, 2014, 2:35 PM| Comment!
Aug. 1, 2014, 8:42 AM
- The uptick in unemployment in July came as the labor force participation rate edged up to 62.9% from 62.8%. It was 63.4% a year ago. The employment-to-population ratio of 59% was flat from June, and up from 58.7% a year ago.
- The average workweek remained flat for the fifth straight month at 34.5 hours. Average hourly earnings edged higher by a penny to $24.25 - they're up 2% from a year ago.
- May's 224K jobs gain was revised higher by 5K jobs and June's 288K was bumped higher by 10K for total upward revisions of 15K.
- The broader U-6 unemployment rate rose to 12.2% from 12.1% - a year ago it stood at 13.9%.
- The 10-year Treasury yield slips to 2.53% from 2.59% ahead of the report.
- Previously: July job gain below estimates
- Full report
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TMF, TTT, ZROZ, SBND, TLH, IEI, DTYS, TYO, DLBS, VGLT, BIL, UBT, UST, VGIT, SHV, TLO, VGSH, TBX, SCHO, GSY, SCHR, TENZ, DTYL, ITE, TYD, LBND, SST, TYBS, DTUS, DTUL, TUZ, TBZ, DLBL, DFVL, FIVZ, DFVS, TYNS
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