January 17, 2024 | Daily JAM, Morning Briefing, Short Term |
Last month, the bond market was almost fully pricing the first interest rate cuts from the Federal Reserve in March. Now, though the odds for a 25 basis point cut are down to more like 50/50. Today, January 17, the yield on the 10-year Treasury rose another 5 basis points to 4.10%.
January 16, 2024 | Daily JAM, Morning Briefing |
Mae West said, “Too much of a good thing is never enough.” For the financial markets that’s just not true, however. The markets are prone to swing to excess and then to painfully retrace the extreme end of the swing. You can see it happening now with interest rates and the bond market.
December 20, 2023 | Daily JAM, Morning Briefing |
Bond traders and investors kept the bond rally going today December 20. The yield on the 10-year Treasury dropped another 8 basis points to 3.85% today. The yield on the 2-year note fell 4 basis points to 4.40%. The drop in yields came as a result of gains in bond prices. On the other hand, the major stock indexes had a big down day. The Standard & Poor’s 500 fell 1.47% and the Dow Jones Industrial Average ended the day down 1.27%. The small-cap Russell 2000 dropped 1.86%. The NASDAQ Composite and the NASDAQ 100 soared 1.50% and 1.53%, respectively.. The differing results don’t reflect a divergence of views on interest rates–both bond and stock markets see the Federal Reserve cutting interest rates in 2024. The difference does, however, reflect differing views on valuation
December 8, 2023 | Daily JAM, Morning Briefing |
The U.S. economy added 199,000 jobs in November, the Labor Department reported today, Friday, November 8. The unemployment rate dropped to 3.7% from 3.9% in October That surprised economists who had expected the unemployment rate to hold steady. The bond market reacted in the morning hours after the report was released at 8:30 a.m. New York time by selling Treasuries. The yield on the 10-year Treasury gained 8 basis points to 4.233% as of 10 a.m. in New York as bond prices fell. The yield on the two-year Treasury jumped 78 basis points to 4.669%.
December 4, 2023 | Daily JAM, Morning Briefing |
I’m hearing some chatter that says bond traders and analysts are stepping aside from the bond rally. Or are planning to do so. Their argument is that the move has been too far, too fast. Specifically, I’ve heard talk of selling if the yield on the 10-year Treasury hits 4.00%. On Friday, the yield was 4.20%. So I’d be watching to see if anything like a bond rally pause or reversal materializes during the days ahead of the Federal Reserve meeting on December 13
November 8, 2023 | Daily JAM, Morning Briefing |
Stocks had a mixed close today, November 8. The Standard & Poor’s 500 was up just 0.03% and the NASDAQ Composite actually fell by 0.05%. The small-cap Russell 200 lost 1.17% as small company stocks continue to send a warning sign about the economy and bond yields. I think it would have been much worse without a strong action for 10-year Treasuries today A successful auction–lots of demand at lower yields–of $40 billion in 10-year notes took the yield on the 10-year Treasury down 6 basis points to 4.51%.
November 3, 2023 | Daily JAM, Jubak Picks, RWM, Short Term |
On Monday, I will add to my short position in the small-cap Russell 2000 by buying more of the ProShares Short Russell 2000 ETF (RWM) for my Jubak Picks Portfolio. This buy will give me two positions in the ProShares Short Russell ETF. The first position, added to the portfolio on July 23, 2023 is up 0.08% as of the close on November 3. Why go all in on shorting the Russell now?
November 1, 2023 | Daily JAM, Morning Briefing |
Certainly, it wasn’t any surprise that at today’s meeting the Federal Reserve decided to keep its policy rate steady at 5.25% to 5.50%. Going into the meeting the CME FedWatch tool put the odds of the Fed standing pat on rates at close to 100%. So why then the huge rally in the 10-year Treasury that pushed yields down 18 basis points on the day to 4.76%?
November 1, 2023 | Daily JAM |
I guess it’s good news. Today the U.S. Treasury Department said it will slow the pace of increases in its longer-dated debt auctions in the November 2023 to January 2024 quarter to just $112 billion in the next auction, up from $103 billion. Primary dealers surveyed by Bloomberg had expected an increase to $114 billion in next week’s quarterly refunding.
October 31, 2023 | Daily JAM, Morning Briefing |
The Federal Reserve will announce its interest rate decision on Wednesday–the market currently expects no change to policy interest rates. But I’d argue that the bigger news on internet rates for the day will come when the Treasury announces how many notes and bonds it intends to sell in auctions from November through January. Right now, it looks to me like the bond market is driving interest rates rather than the Fed so the number of bonds Treasury needs to sell is likely to set interest rate trends for the next few weeks. Bloomberg’s survey of Wall Street primary bond dealers shows that the consensus projection for the quarterly refunding sales announcement—including 3-, 10- and 30-year Treasuries— is for a $114 billion total, up from the $103 billion total three months ago.
October 27, 2023 | Daily JAM, Morning Briefing |
The Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, accelerated to a four-month high in September. The core Personal Consumption Expenditures index, which strips out volatile food and energy prices, rose 0.3% in September from August, according to the Bureau of Economic Analysis. As with this week’s report of a surprisingly strong 4.9% annual GDP growth, the “culprit” in today’s surprise was strong consumer spending. Inflation-adjusted consumer spending jumped 0.4% last month. The numbers in this report for inflation and earlier this week for GDP growth argue that the Federal Reserve might consider another interest rate increase in the remainder of 2023. But Wall Street sentiment doesn’t agree with that view.
October 8, 2023 | Daily JAM, Morning Briefing |
I’m hoping for some clarity this week on the market trend after Friday’s wild day. Friday’s intraday moves summed up the uncertainty about the direction of this market.