Good Friday AM,
A good piece from Dan Rawitch today:
You know, the news was okay, It seems that, when these Fed days happen, we get under the Powell whammy and markets aren’t all that rational. I just hate where it’s at. 3.97 on the ten year note. So, personal income came in lower than expected. That’s a good thing. But personal spending came in almost double. That’s a bad thing. The PCE prices came in lower than expected. It came in exactly where they should have. And so that’s also a good thing. Look at how low inflation is, two tenths of a percent. It’s a beautiful thing. Employment cost index dropped, and consumer sentiment also dropped. So, you have a mix here. In fact, the only real bearish thing here was the spending number. Everything else wasn’t too bad. Employment cost index even dropped, but bonds just don’t care because they’re under the Fed’s whammy. How long will it take to get out of there? I don’t know, but just plan on the ranges that we are in. 3.97% on the ten year could go to 4.10 so it is dicey.
My recommendation is that without a reason to float, you should lock.
I do think the Fed is done hiking and over the short term, rates are going to improve.
Why did GDP jump more than expected?
Well, Consumer spending cooled but rose enough to drive overall growth alongside much stronger business investment in the second quarter. Those factors combined to buck economists’ earlier expectations that a downturn would start in the middle of this year due to higher interest rates. Solid growth adds to the prospect of a soft landing—in which inflation returns close to the Federal Reserve’s 2% target without a recession. It is tough to see these components continuing to grow which will be needed to support the soft landing mantra.
Not much has been said about the BOJ but don’t forget, we are a global economy.
The Bank of Japan shook up financial markets by loosening its grip on bond yields. The move sent Japan’s 10-year yield to the highest level since 2014, triggered big swings in the yen and sparked a debate over whether the country is starting to normalize policy. US bond markets tumbled on speculation that higher yields in Japan may lead investors to repatriate cash — Japanese investors are the biggest foreign holders of US government debt. Treasury 10-year yields were flat at 4%, having risen 13 basis points the previous day. US shares took a knock towards close on Thursday when the Nikkei news agency reported the BOJ would discuss tweaks to yield-curve control at its meeting.
Please remain safe and stay healthy, enjoy the weekend and first, make today great!