With the yield curve continuing to compress, the debate over what it means keeps on. To me, it is very simple the message being sent. We must understand that we no longer have economic cycles. We have credit cycles that ebb and flow with monetary policy. After all, when the Fed cuts rates to extremes its only function is to encourage the rest of us to borrow a lot …
John Williams
The 2 yr note yield is now a stone’s throw from touching 2.40% as the new NY Fed President John Williams is speaking in Madrid. He forecasts a 3.5% unemployment rate next year and expects core PCE to touch 2% this year. He did repeat the need for “gradual” rate hikes to “reduce the risk that the economy could overheat.” Now of course anything and everything could …
Again, it’s all about multi family
Housing starts in March totaled 1.32mm annualized, above the estimate of 1.27mm and February was revised up by 60k. Looking under the hood and it was all the multi family side again that drove the upside. Multi family starts totaled 452k, up from 395k in February and that is the most since December 2016. Single family starts fell by 33k m/o/m to 867k, a 3 month low. …
Some interesting goings on
Apparently taking advantage of the January jump in interest rates, foreign buying of US Treasuries picked up noticeably in February totaling $43.2b. That's the biggest one month of purchases since May 2017. About $10b of that was from hedge funds as they fall under the 'Cayman Islands' locale. The Chinese added to their inventory of notes and bonds, buying $15b worth …
Builder sentiment/Inventories
The NAHB home builder sentiment index for April fell 1 pt to 69 and a touch below the estimate of no change. It remains high (ONLY measuring direction of sentiment, not degree) as it’s well above 50 but has now fallen for a 4th straight month and matches the lowest level since October. Both the Present Situation and Outlook components fell m/o/m but Prospective …
Retail sales/Manufacturing
Core retail sales (ex auto’s, gasoline and building materials) in March were about as expected with a .4% m/o/m gain but off a slightly lower base as February was revised down by one tenth. Auto sales rebounded by 2% after 4 straight months of declines. Building materials fell for the 2nd month in the past 3. Online sales were strong as usual with an .8% m/o/m rise …
Commodities
The price of aluminum is hitting a fresh 6 year high and is now up 19% from the low hit two weeks ago as the impact of sanctions on Rusal continue to ripple through the global market and every used of aluminum scrambles for other supply. The CRB index on Friday closed just a hair below 200 and is less than 1 pt from its highest level since October 2015. I still find …
Succinct Summation of the Week’s Events – 4/13/18
Positives Depending on one’s view this could also be seen as a negative: in the FOMC minutes they said “A number of participants indicated that the stronger outlook for economic activity, along with their increased confidence that inflation would return to 2 percent over the medium term, implied that the appropriate path for the federal funds rate over the next …
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Trade policy impacts confidence/Jobs
The preliminary April UoM consumer confidence index fell to 97.8 from 101.4 and that was below the estimate of 100.4. Most of the decline was led by the Current Conditions component which was lower by 6.2 pts m/o/m while Expectations were down by 2 pts. One year inflation expectations fell one tenth to 2.7% and is back to where it was December thru February. Part of …
Rates/Earnings/China
The US 2 yr note yield is touching a new 9 1/2 year high this morning at 2.35-.36. I'm going to repeat what I said yesterday that I believe the uptick in the inflation stats "help to explain the further flattening in the yield curve yesterday with short rates moving higher, especially following the FOMC minutes where they hinted at maybe 4 hikes this year. I know, …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.