March 16, 2021 | Daily JAM, Morning Briefing |
On Wednesday the Federal Reserve will update its projections for GDP growth, inflation, and the timing of any interest rate increase. In December, Fed officials, on the famous (or infamous) dot plot indicated that that central bank officials expected to hold benchmark interest rates in the current 0% to 0.25% range through the end of 2023. in the months since that projection from the Fed the market has been pricing in a different scenario, one that sees a tightening in interest rates from the Fed at the end of 2022. In other words roughly a year earlier than the Fed’s projected schedule last December.
March 14, 2021 | Daily JAM, Morning Briefing |
With everything going on, it’s easy to forget about the upcoming meeting of the Federal Reserve’s interest rate setting body, the Open Market Committee, on Wednesday. Which would be a mistake because, in my opinion, nothing is more important than interest rates (and bond yields) for the direction of stocks over the next four months or so. The Fed isn’t expected to announce any change in policy on Wednesday. Benchmark interest rates will stay at 0% to 0.25%. The central bank is almost certain to keep buying $120 billion a month in Treasuries and mortgage-backed securities But this meeting in scheduled to include an update on the Fed’s projections for future inflation and economic growth. Those words have the potential to shift the market ahead of any action.
March 3, 2021 | Daily JAM, Videos |
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. The thirteenth YouTube video “2 Hedges for All Your Market Worries” went up today.
February 28, 2021 | Daily JAM, Morning Briefing |
Last week’s bond market plunge and yield increase priced in an earlier move on interest rates by the Federal Reserve. According to Bloomberg, markets now see a Federal Reserve interest rate hike by March 2023. At the beginning of February the bond market had priced in an initial interest rate increase in mid-2023.
February 28, 2021 | Daily JAM |
The odds are that the bond market will snap back this week as traders decide that the drop in the price of the 10-year Treasury (and the climb in yield) has been too far and too fast. (A drop in Treasury yields would be likely to send stocks higher, reversing the trend of the last week.)I don’t think that reverses the trend beyond a week’s bounce, however. The $1.9 trillion coronavirus stimulus/relief bill still scares the bond market with the possibility of an uptick in inflation (finally) and the possibility that the package migh work and actually put the economy on the path to a sustained recovery. (And why might that be a bad thing, you ask: Because a clearly sustained recovery would incline the Federal Reserve to end, or at least scale back, its monthly purchase of $120 billion in Treasuries and mortgage-backed securities.)On Friday the yield on the 10-year Treasury fell to 1.40% as bond prices rose. That was an 11 basis point drop on the day and it could well be a harbinger of a bounce for Treasuries this coming week.
February 25, 2021 | Daily JAM, Morning Briefing |
Yields on U.S. Treasuries hit 1.61% early today before pulling back slightly to 1.51% as of 3 p.m. New York time. It’s not just the rise in yields or even the magnitude of the increase that has so disconcerted the bond market today, February 25. It’s the speed of the move. As of 3 p.m., the bond market was looking at a 14 basis point increase in yields just today. That’s a huge move for the normally slow-moving bond market.
February 22, 2021 | Daily JAM, Morning Briefing |
As of the close in New York today, February 22, the yield on the 10-year Treasury had climbed another 3 basis points to 1.37%. Commodities that can act as inflation hedges were up as well. Copper showed no signs of ending its climb, rising 4.17% today to $8909 a ton on the London Metal Exchange today
February 21, 2021 | Daily JAM, Friday Trick or Trend |
Simple rules of supply and demand say that plans by the Biden administration for a $1.9 trillion package of coronavirus stimulus/relief and proposals to spend another $2 trillion on infrastructure should be driving up yields on government bonds (and driving down prices.) Investors want more reward–higher yields–in return for buying more Treasuries and taking on the risk that all this supply will push Treasury prices lower. But the bond market is hardly ever as simple as it looks and there are other trends at work that you ought to figure into your investment calculations.
February 21, 2021 | Daily JAM |
Federal Reserve Chair Jerome Powell will testify in front of the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday–and do his best not to make any news.
February 11, 2021 | Daily JAM, Mid Term, Morning Briefing |
In a speech on Wednesday, Federal Reserve chair Jerome H. Powell said that the unemployment rate in January was close to 10%, not the 6.3% rate reported by the Labor Department last week.
January 27, 2021 | Daily JAM |
Today, January 27, the Federal Reserve’s Open Market Committee left their benchmark interest rate unchanged near zero. The Fed also said that it would maintain the current program of bond buying at $120 billion a month until “substantial further progress” toward its employment and inflation goals has been made. It made no changes to the composition of purchases leaving the split at $80 billion a month in Treasuries and $40 billion in mortgage-backed securities.
January 12, 2021 | Daily JAM, Morning Briefing |
For a day, at least, the seemingly inexorable climb in Treasury yields stopped. The yield on the 10-year Treasury, which is up 23 basis points in the last month, dropped back to 1.13%, a retreat of 2 basis points.
