Imagine for a second that the Chinese government arrested the CFO of Apple and extradited him to the US. While it's not the case, also imagine if the CFO was the child of Steve Jobs. I'll leave my comments at that. In yesterday’s Beige Book, the Fed described the US economy as having “expanded at a modest or moderate pace from mid October through late November, …
Bond yields
Only 13 bps now in the 2s/10s yield spread. What is the most striking aspect of this move is the extent of it in just two days and how the acceleration came out of nowhere right after a supposed amicable meeting between the US and China. It's almost as if the bond market screamed out, "It's too late, the growth slowdown underway can't be reversed. Tariffs are still …
How yield spreads are closing
We are finishing up the day with the 3s/5s spread now inverted for the first time since November 2008 and a 2s/10s spread at just 15.5 bps vs 20 on Friday and 27 bps two weeks ago. What’s interesting is that the 2 yr note yield is back at 2.83%, where it closed last Tuesday before Powell gave his “just below” speech on Wednesday. …
2s/10s spread breaks below 20 bps
It hasn’t been a topic of conversation recently but I just want to highlight that the US 2 yr yield – 10 yr spread today is breaking below 19 bps, the lowest since June 2007. The 2 yr and the 5 yr yield spread is down to 2 bps. The 7 yr and 10 yr spread is now at 8 bps. Lastly, 3 month LIBOR and the US 2 yr is just 5 bps vs 35 bps just one month ago. I’m not sending …
US Manufacturing
The November ISM manufacturing index rose to 59.3 from 57.7 and that was better than the expected decline to 57.5. The index reached a high this year in August at 61.3 and was at 59.8 in September. After falling by 4.4 pts in October, new orders rebounded by 4.7 pts in November. Backlogs were up by .6 pts. Export orders held at 52.2, the lowest since November 2016, …
Punting for another 3 months
Detente for 3 months and we'll take it. I'm particularly happy for the American farmer of soybeans as they've been a sacrificial lamb in this spat but the 25% tariff on soybean imports into China still remains for now. I'll take this line from an article from the South China Morning Post last night, "The 90 day ceasefire gives Beijing time to tackle some of …
The same movie keeps playing/Overseas data
After hearing from Jay Powell and reading thru the FOMC minutes, keep in mind the negative feedback loop that is modern day monetary policy. 1)The Fed keeps rates at zero for 7 years helping to drive 6% annual home price gains, more than 3 times the rate of inflation. That is called tinder and the spark that lights it into a problem is when interest rates rise. The …
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Home sales fall again
Pending sales of existing homes in October fell 2.6% m/o/m, well worse than the estimate of up .5%. On a y/o/y basis, contract signings have fallen in 9 of the 10 months so far this year. The seasonally adjusted index is at the lowest level since the summer of 2014. Most of the decline was seen out West as sales there fell 8.9% m/o/m and the NAR said “The West region …
Inflation, spending, income and claims
The headline PCE inflation deflator rose .2% m/o/m in October as expected and 2% y/o/y. The core rate though was up .1% m/o/m which was one tenth below the estimate as was the 1.8% y/o/y increase. Higher energy prices (which have since changed for gasoline on the downside and natural gas on the upside) drove a rise in non durable goods prices as it offset a decline in …
Are we there yet?
For a market that is so beholden to monetary policy and desperately wanting to know 'are we there yet?' in terms of ending the tightening, I only thought of this yesterday after Powell basically said we are: //www.youtube.com/watch?v=18AzodTPG5U. BUT, as long as QT is still in place, we really aren't there just yet. Their balance sheet is still expected to …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.