Dallas Fed President and voting member Robert Kaplan was particularly hawkish today. This is just a few weeks after he said he was ‘lightly penciling in a rate hike’ next month. He reiterated the Fed view that the “US economy is at or near full employment” but also said “While real wage growth has been sluggish, we are beginning to see welcome signs of increasing …
Another Mediocre 2 yr Note Auction. What’s Going On?
We had another very mediocre 2 yr note auction. The yield of 1.765% was a hair above the when issued. The bid to cover of 2.73 was below the one year average of 2.81. Also, dealers got stuck with 41% of the auction vs the 12 month average of 37%. Bottom line, this is relevant because one would think 9 yr highs in the 2 yr yield would generate some more excitement …
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Dallas Manufacturing/Look at Labor Market Questions, Answers
The November Dallas manufacturing index fell to 19.4 from 27.6 in October and that was 4.6 pts below the forecast. The 19.4 figure is right in line with the year to date average of 19.5. New orders and production fell. Backlogs rose 1 pt. Employment dropped by 10 pts and wages/benefits disappointingly fell by 8.3 pts. Prices paid and received were little changed …
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New Home Sales and Record Average Price
New home sales in October totaled 685k, 58k more than expected but partially offset by a downward revision of 22k in September to 645k. The South saw strong sales as the area continues to rebound from the storms. The West will certainly have a lot of rebuilding to do soon too after the wildfires. Sales in the Northeast and Midwest rose too. Smoothing out the past 3 …
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The FOMC Minutes, I’m Now Ready to Take a Nap
With general agreement on the part of FOMC members that the labor market is operating near or at full employment, the eyes of followers thus shifts to what they think about inflation. My head is spinning on the commentary and I just can’t understand the obsession of 2%. The FOMC minutes said “Many participants judged that much of the recent softness in core inflation …
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Consumer Confidence/Mortgage Apps
The final November consumer confidence index from UoM was 98.5, a bit better than the initial print of 97.8 and the estimate of 98. It’s down a touch from the 100.7 seen in October but it still matches the 2nd best read in this recovery. From October, Current Conditions fell 3 pts while Expectations were lower by 1.6 pts. Inflation expectations for one year out was …
Bullish Sentiment Ebbs a Touch/Other
After reaching its most bullish extreme since 1987 two weeks ago when we saw a 50 pt spread between bulls and bears, this ebbed a bit for a 2nd week although remains highly stretched. Bulls totaled 61.5% vs 63.5% last week and vs the 30 yr high of 64.4% in the week prior. Bears stood still at just 15.4% while those expecting a Correction rose by 2 pts. The peak spread …
Home Sales in October, Same Issues
Existing home sales in October totaled 5.48mm, above the estimate of 5.40mm while September was revised slightly lower to 5.37mm from 5.39mm. These levels compare with the year to date average of 5.52mm. Inventory and pricing continues to be an issue. The number of homes for sale (see chart below) fell to the lowest since March and this sent months’ supply down to …
Pretty Persistent/’Faith’
The US 2 yr note yield is up again at 1.76-1.77%. To quantify the persistence in the rise in short term US interest rates, over the past 52 trading days since early September when the 2 yr yield took off, only 14 days did it fall with 38 days higher. Looking at the Relative Strength Index of the yield has it the most ‘overbought’ since December 1994 just as the Fed …
What Little Is Going On
With the ever narrowing of the yield curve and the 2s/10s spread at a fresh 10 yr low at just below 62 bps we all find ourselves debating the reasons. I think it’s simply just two as I’ve stated before, 1)worries about the ability of the US economy to withstand QT and more rate hikes as its paid to flatten the curve in the last two rate hike cycles, 2)the lid kept on …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.