Apr. 4, 2014, 8:41 AM
- In addition to February's revision from 175K in job gains to 197K, January is revised higher by 15K jobs to 144K.
- Average hourly earnings fell by $0.01 to $24.30. On a Y/Y basis, average hourly earnings are higher by 2.1%. The average workweek increased 0.2 hours to 34.5 hours, offsetting the net decline over the previous three months.
- The headline unemployment rate didn't fall as expected, but this came as people flocked back into the workforce to the tune of about 500K workers. The labor force participation rate rises to 63.2% from 63% previously. A year ago it was 63.3%.
- The broader U-6 unemployment rate rose to 12.7% from 12.6%. A year ago it stood at 13.9%.
- S&P 500 (SPY) futures pop just a bit higher, now +0.3%; the 10-year Treasury yield ticks down a basis point to 2.79%.
- S&P 500 ETFs: SPY, IVE, SH, SSO, SDS, IVV, VOO, SPXU, UPRO, SPXL, RSP, RWL, EPS, IVW, SPYG, RPG, RPV, SPYV, VOOG, BXUB, VOOV, TRND, SFLA, BXUC, BXDB, SPLX, FTA
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, IEI, TLH, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, UBT, TBX, VGIT, TLO, VGSH, SCHO, GSY, DTYL, ITE, SCHR, LBND, TYD, TENZ, TYBS, DTUL, SST, DTUS, FIVZ, TUZ, TBZ, DFVL, DLBL, DFVS, TYNS
- Previously: 192K jobs gain in March about inline
Apr. 3, 2014, 7:20 AM
- Speaking to Reuters, Williams says the pace of rate boosts should be "very slow," with the Fed Funds rate's first digit just being a "2" at the end of 2016.
- His comments suggest something along the line of Greenspan's series of 25 basis point hikes to end the massive accommodation he put in place following the crash of the Internet bubble (that mellow rate hike cycle gave us the property bubble).
- Yesterday, Atlanta's Dennis Lockhart too suggested beginning rate hikes in late 2015, but new house hawk Jim Bullard sees rate increases starting in less than a year and a Fed Funds rate of at least 4% by the end of 2016.
- ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
Apr. 2, 2014, 11:48 AM
- Hawkish before he was dovish, and now hawkish again, St. Louis Fed boss Jim Bullard tells Bloomberg he expects the first rate hike in Q1 of 2015, though conceding he's ahead of the pace of most of his FOMC colleagues. His "dot" for the end of 2016 is 4%-4.25%, again ahead of that of most of the FOMC members.
- As for bubbles, the man who belonged to the group having no inkling of the pre-crisis housing bubble sees none now.
- The 10--year Treasury yield climbs a couple of more basis points in response to Bullard's remarks, now up 4 bps on the session to 2.81%. December 2015 Eurodollar futures at 98.80 are pricing in about 100 basis points of tightening next year.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, IEI, TLH, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, TBX, UBT, VGIT, VGSH, TLO, SCHO, GSY, DTYL, ITE, SCHR, LBND, TYD, TENZ, TYBS, DTUL, SST, TBZ, FIVZ, TUZ, DTUS, DFVL, DLBL, DFVS, TYNS
Apr. 1, 2014, 12:27 PM| Comment!
Mar. 31, 2014, 7:53 AM
- After pouring money into U.S. Treasury ETFs in the first two months of the year, investors pulled $10.3B in March, the largest amount withdrawn since December 2010, according to Bloomberg. The $7.86B iShares 1-3 Year Treasury Bond ETF (SHY) is the leader on a percentage basis - losing one-third of its AUM this month.
- The catalyst is clearly the FOMC's signal on rate hikes beginning in about a year. “When the market thinks the Fed is going to raise rates, they don’t tend to stick around in short-dated bonds,” says global macro strategist Thomas Higgins.
- Short-duration Treasury ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
- In other areas of fixed income, inflation--linked bond ETFs had their first inflows in 19 months, and investors continue to plow money in high-yield.
- TIPs and junk ETFs: HYG, JNK, TIP, HYLD, HYS, SJNK, PHB, VTIP, IPE, SCHP, SJB, STPZ, LTPZ, TIPZ, HYHG, STIP, ANGL, HYLS, XOVR, THHY, UJB, TPS, SHYG, QLTC, TDTT, TIPX, HYZD, TDTF, HYND, SIPE
Mar. 28, 2014, 11:13 AM
- If this is a bear move, bulls say "bring it on." The 10-year Treasury yield (including today's 3 bp increase) is at 2.71% vs. 2.67% at the start of March. Not a perfect gauge, the iShares Barclays 20+ Year Treasury Bond ETF (TLT) is actually higher by 0.8% this month.
- The move in fixed-income comes as the S&P 500 held flat and the FOMC signaled a sooner-than-expected end to QE and quicker-than-expected possible boost in the Fed Funds rate. More tied to what the Fed may or may not do with its benchmark, the 2-year note yield jumped a big 14 basis points to 0.45% in March.
- Taken together, the yield curve is flatter today than it was at the start of the month - not great news for those trying to earn a spread - and maybe suggesting slower growth going forward amid a Fed thinking of tapping the brakes on the economy.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, TBX, UBT, VGIT, VGSH, TLO, SCHO, GSY, DTYL, SCHR, ITE, LBND, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, TBZ, DFVL, FIVZ, DFVS, DLBL, TYNS
Mar. 26, 2014, 8:12 AM
- Atlanta Fed chief Dennis Lockhart tries to walk back Janet Yellen's "six-months" comment on rate hikes (putting the first boost in H1 of 2015), saying that time frame is a minimum and suggesting rates won't move higher until the second half of next year.
- "I think it's going to be longer than that indication ... We’re not going to flip a switch from easy money to tight money. We’re not going to flip a switch where overnight you go from one environment to a radically different environment. I don’t see that happening."
- Separately, St. Louis' Jim Bullard says the FOMC hasn't talked about or committed to a specific month to end QE. “This is not a calendar-based policy - it’s a data-based policy."
- ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
Mar. 25, 2014, 7:25 AM
- The Fed sees QE ending in October or November with rate hikes beginning in 2015, says Philadelphia Fed chief Charles Plosser, appearing on CNBC. His view is of a Fed Funds rate at "2-something" by the end of 2015 and 3% by the end of 2016. "My dot is 3% at the end of 2016."
- He finds the market reaction to Yellen's press conference last week puzzling as the Fed did not change its policy position. In any case, he's more comfortable talking about economic conditions rather than dates.
- ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
Mar. 24, 2014, 9:02 AM
- The die may already be cast for a hike in the Fed Funds rate next year, but overlooked in the recent Fed news, writes Jon Hilsenrath, is the FOMC's expectation of a 5.4% jobless rate in 2016, but a Fed Funds rate of just over 2%. This is far below the 4% the Fed considers appropriate for an economy hitting on all cylinders, so what gives?
- "The economy can't bear a level of interest rates that looked normal in the past because it has been so deeply scarred by the financial crisis," writes Hilsenrath, shortening the explanation offered by Yellen at her press conference. There is precedent here, and that's the 1940s when the Fed kept rates extraordinarily low as the economy recovered from the Great Depression (though WWII kind of muddles things).
- Back to being a hawk, St. Louis Fed chief Jim Bullard isn't thrilled with this sort of thinking and hopes and expects the Fed Funds rate to be near 4% by the end of 2016. "Ultimately, I think the committee will do the right thing," he said on Friday.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, TBX, UBT, VGIT, TLO, VGSH, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYBS, TYD, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
Mar. 20, 2014, 9:28 AM
- "Yellen didn’t sound at all like a lady with much conviction on that six-month timeframe," says the WSJ's Jon Hilsenrath, offering his take on the line that seemed to upset Wall Street so much yesterday.
- A check of the Fed schedule finds the late October meeting the one at which the FOMC could decide to end QE. Six months from that point suggests a rate hike in April, "but a lot would have to go right in the economy for that to happen," he writes. "Yellen doesn’t sound like a person who feels particularly bound to that course."
- What Yellen did do yesterday, he says, is reawaken investors to interest rate risk - Wall Street had become a bit complacent in believing hikes weren't coming until mid-to-late 2015, and now must price in the chance of tighter policy somewhat ahead of that time frame.
- Long-term yields have backed off a bit from yesterday's spike, the 10-year Treasury down four basis points to 2.78%, but the 2-year Treasury gains another basis point to 0.43% - matching its highest level since September. The June 2015 Eurodollar futures contract is pricing in a Fed Funds rate about 40 basis points higher than it is today.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, ZROZ, SBND, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, UBT, TBX, VGIT, TLO, VGSH, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYBS, TYD, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
Mar. 19, 2014, 2:16 PM
- "The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions," says the FOMC cutting QE another $10B to $55B per month.
- Updating its economic projections, the central forecast for headline unemployment at year's end drops to 6.1%-6.3% from 6.3%-6.5% expected last December. Core PCE inflation remains at 1.4%-1.6%.
- 13 of 16 members expect the first rate hike next year, with 10 seeing a Fed Funds rate of 1% or higher by the end of 2015.
- Treasurys are taking hard the news of faster and sooner rate hikes, the 10-year yield up eight basis points to 2.75%. TLT -0.8%. Gold takes it hard as well, -1.9% to $1,334 per ounce. GLD -1.6%, but the dollar (UUP +0.6%) is higher across the board.
- A check of Eurodollar futures finds nearly a full additional 25 basis point rate hike getting priced into the 2015 and 2016 contracts that wasn't there 20 minutes ago.
- Stocks slip just a bit, the S&P 500 (SPY -0.2%).
- Janet Yellen's press conference begins at 2:30 ET.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, ZROZ, SBND, TLH, IEI, DLBS, TYO, DTYS, VGLT, BIL, UST, SHV, UBT, TBX, VGSH, TLO, VGIT, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
- Gold ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, GLDI, DGZ, AGOL, DGLD, TBAR, UBG, GLDE, GYEN, GEUR, GGBP
- Dollar ETFs: UUP, UDN, DBV, FORX, UDNT, UUPT, USDU
- S&P 500 ETFs: SPY, IVE, SH, SSO, SDS, IVV, VOO, SPXU, UPRO, RSP, RWL, EPS, IVW, SPYG, RPG, RPV, SPYV, BXUB, VOOG, VOOV, TRND, SFLA, BXUC, BXDB, FTA
Mar. 12, 2014, 3:32 PM
- "Buyside demand was the highest in a year for any 10-year auction and it showed," says RBS of today's $21B sale of reopened Treasury notes.
- Already ahead on the session, Treasury prices added to gains following the auction, and the 10-year yield is now off five basis points to 2.72%. TLT +0.8%, TBT -1.6%.
- GMP Securities Adrian Miller notes demand was far higher than for Tuesday's 3-year auction, with a bid-to-cover ratio of 2.92:1. He notes expectations for the Fed to adjust forward guidance next week to assure markets of no rate hikes until 2015 H2.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, TLH, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, TBX, UBT, VGIT, VGSH, TLO, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
Mar. 10, 2014, 9:07 AM
- Under the old plan from 2011, the Fed expected to take a number of steps to remove the trillions it pumped into the financial system. A new plan being considered would instead leave that money in, perhaps permanently, instead paying interest on excess reserves and anchoring rates using reverse repos.
- The upshot: The Fed would set interest rates by managing the cost rather than the supply of money.
- This jibes with previous Fed comments that the central may not have to actively sell MBS on its balance sheets, and just last week FRBNY President Bill Dudley said the Fed wouldn't have to allow paper to mature and run off its balance sheet months ahead of rate hikes.
- The new plan is just a trial balloon, reminds Hilsenrath, noting some at the Fed would prefer a return to the old days of scarce reserves and setting rates by managing those levels.
- Shorter-dated Treasury ETFs: SHY, IEF, PST, IEI, TYO, DTYS, UST, BIL, SHV, VGIT, TBX, VGSH, SCHO, GSY, DTYL, SCHR, ITE, TYD, DTUL, SST, FIVZ, DTUS, TUZ, DFVL, TBZ, DFVS, TYNS
Mar. 7, 2014, 8:48 AM
- The BLS notes severe winter weather occurring in much of the country during the February survey period. Bad weather - says the agency - is more likely to show up in average weekly hours than in the headline payroll number, and this month's report has the average workweek declining by 0.1 hours to 34.2 hours.
- Previous: Jobs +175K vs. +154K expected
- Maybe most surprising in today's report is the 0.4% increase in average hourly earnings, the biggest gain in nearly a year.
- The labor force participation rate is flat at 63% - it was 63.5% a year ago. The employment-to-population ratio is flat at 58.8% - it was 58.6% a year ago.
- Expiring unemployment benefits didn't put a dent in long-term unemployed which rose 203K.
- The broader U-6 unemployment rate slips to 12.6% from 12.7% - it was 14.9% a year ago.
- Bond traders are seeing a strong report, with the 10-year Treasury yield shooting up to 2.81% from 2.72% before the release. TLT -0.8%, TBT +1.7%.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, TLH, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, VGIT, VGSH, TBX, TLO, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
Mar. 6, 2014, 9:00 AM
- The weather knocked about 0.5-1% off of growth in Q1, says FRBNY boss Bill Dudley - now being interviewed by Jon Hilsenrath. Dudley now expects GDP to print at under 2% in Q1, but to rebound in Q2 as things warm up.
- The 6.5% unemployment rate threshold is "already obsolete" as we're just about already there and nobody expects a rate hike anytime soon. Dudley prefers the BOE's more qualitative approach where a broad range of labor market indicators are looked at.
- Webcast and blog here
- ETFs: SHY, IEF, PST, IEI, TYO, DTYS, UST, BIL, SHV, VGIT, VGSH, TBX, SCHO, GSY, DTYL, SCHR, ITE, TYD, DTUL, SST, FIVZ, DTUS, TUZ, DFVL, TBZ, DFVS, TYNS
Mar. 3, 2014, 11:42 AM| Comment!
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