Free Republic

In their crystal ball analysis of major developed bond markets (sorry, Japan, you’re not in the spotlight this time), Goldman Sachs is waving the flag of concern. The math here is simple: for every one percentage point rise in the public debt-to-GDP ratio, expect medium-term yields to jump at least two basis points throughout the decade. And oh, they conveniently exclude government bonds currently cozying up in central banks’ pockets, implying a broader impact on global financial markets.

Are US financial conditions loose as a goose? Despite resilience in US data, 30Y Yields have plunged back below the 4.00% Maginot Line this morning… Source: Bloomberg The last few weeks have seen US macro data reverse its recent trend of disappointment… Source: Bloomberg The long-end of the curve is outperforming… Source: Bloomberg But, ‘do not fight The Fed’ seems to be the narrative and expectations for a March rate-cut are rising once again… Source: Bloomberg And the market is pricing in over 160bps of cuts for next year… Source: Bloomberg Financial Conditions are now at the same level of...

A Wall Street selloff intensified Tuesday as rising Treasury yields piled on pressure and investors got a reminder not to expect a Federal Reserve interest rate cut any time soon. The S&P 500 (^GSPC) dropped almost 1.1%, while the Dow Jones Industrial Average (^DJI) tumbled about 1.1%, or more than 350 points. The tech-heavy Nasdaq Composite (^IXIC) was down over 1.5% after closing with a gain on Monday. Hawkish comments by Fed policymakers reminded investors that resilience in the US economy likely means borrowing costs will stay higher for longer. Traders are now pricing in odds of 29% that policymakers...

Silverado! No, not the Chevy full-size pickup truck, but the precious metal Silver is up over 1% this morning! The US Treasury 10Y-2Y yield curve remains inverted at -102.7 basis points for the 244th straight day as M2 Money YoY (aka, liquidity) evaporates. Silver is up over 1% this morning. Bitcoin Cash is up 12.39% this morning. Speaking of Silverado, a fully loaded new 2023 Chevy Silverado 1500 ZR2 costs around $100,000. Thanks Biden and Powell (BiPow?). Try financing that purchase with auto loan rates soaring!

The 2-year U.S. Treasury yield on Tuesday topped 5%, and rose to its highest level since 2007, as investors assessed comments from Federal Reserve Chairman Jerome Powell who said the central bank may need to increase the pace of interest rate hikes again.

We got trouble in Potomac City! No, I’m not talking about the numerous Top Secret documents that Biden carelessly left in his garage in Delaware and the UPenn Biden Center. And they found more over the weekend. I’m talking about the US Treasury 10Y-2Y yield curve being inverted for 135 straight days. And thanks to inflation, REAL wage growth has been negative for 21 straight months. All this is happening while M2 Money growth (green line) stalls to 0% YoY. Swaps 5Y are rising as The Fed withdraws monetary stimulus.

Lightning strikes! The 12-month-ahead probability of recession spiked in November across all of yield curve models. The deterioration in the outlook was most significant in the one that relies on the 3-month/18-month forward spread — Fed Chair Jerome Powell’s favored model — which now sees a 59% chance of recession next year, compared with almost 0% six months ago. Yield curve models see the strongest signal for recession starting around September 2023. We assess the probability of recession in the months ahead by looking at a suite of models: three yield curve models — which take as their sole input...

We’ve goin’ down! The US Treasury 10Y-5Y yield curve has gone into negative territory (which usually occurs before a recession). At the same time, US mortgage rates are climbing like Tom Cruise in “Top Gun: Maverick” to 5.87% as The Fed tightens its choke hold on markets.

Inflation is roaring along caused by government spending and energy policies, hurting the American middle class and lower-income groups. Now we see the US Treasury 10Y-2Y flattening towards zero and the10Y-5Y curve slipping deeper into inversion as Q1 GDP growth slows to 0.867. The US yield and dollar swap curves remain steeply upward sloping, but with the dollar swap curve around 120 basis points high than the Treasury yield at the 6-month tenor. Various Federal Reserve talking heads are sounding like Derek Zoolander. “With inflation at a four-decade high, Fed Chair Jerome Powell has set the central bank on course...

LONDON, March 28 (Reuters) - The U.S. yield curve measured by the gap between five and 30-year government bond yields inverted on Monday for the first time since early 2006 as a sell-off in the market resumed, with short-dated bond yields jumping to their highest since 2019.

The US Treasury 10Y-5Y curve (aka, the belly of the Treasury beast) has inverted. It is more about the 10Y Treasury yield rising more slowly than the 5Y yield. Freddie Mac’s 30Y mortgage commitment rate rose to 4.42%. Today’s initial jobless claims came in at 187k, the lowest in modern history!! Overheated much? More fuel on The Fed Fire to raise rates above 0.50%. Fixed-income trading floors:

On Monday at 11:30 EST, The Federal Reserve Board of Governors will have a closed door session to determine if they should raise rates and/or change the speed of Fed asset purchases. Between raging inflation and the potential wag-the-dog Russian/Ukraine tensions, The Fed has a lot to consider. Particularly if they are watching the 10Y-2Y Treasury yield curve plunging. And we have the USD Inflation Swap Zero Coupon rate rising again. While the Treasury and US Dollar Swaps curve are upward-sloping (not surprising since The Fed has aggressively pushed short-term rates to near zero), we are seeing Treasury Inflation Protected...

There is some $15 trillion in government debt that now yields less than zero, and former Federal Reserve Chairman Alan Greenspan believes there’s no reason why U.S. government bond yields couldn’t join much of the developed world in the subzero world.

The Dow Jones Industrial Average dropped more than 400 points, with 10 of the 11 major S&P sectors in the red, led by the energy index’s 3.49 percent fall. Nonfarm payrolls rose by 200,000 jobs in January, the Labor Department said, beating expectation of 180,000. Average hourly earnings rose and boosted the year-on-year increase to 2.9 percent, the largest rise since June 2009. After the data, benchmark 10-year Treasury yields extended their rise to more than 2.8 percent, while traders boosted bets that the U.S. Federal Reserve will raise interest rates three times this year. Fast-rising wages could prompt more...

The Philadelphia Fed Business Outlook Survey declined to -5.20, according to their latest report. The current activity index has shown no pattern of sustained growth over the past seven months, generally alternating between positive and negative readings (see Chart). The number of firms reporting decreased activity this month (29 percent) edged out those reporting increased activity (24 percent). So, Philly’s Steak isn’t sizzling. Rather, it’s getting cold. Sovereign yields around the globe continue to decline between a rush to safety and Central Bank easing. And there is nothing more vile than a cold Philly Steak sandwich with coagulated cheese sauce.

During 2006, the slope of the US Treasury Curve (10 yr – 2 yr) slightly negative. Beginning in 2007, the curve began steepening, particularly in the latter half. The 10-2 curve kept steeping through 2008. Enter The Federal Reserve. Starting in September 2007 and through December 2008, The Fed reduced The Fed Funds Target Rate from 5.25% to 0.25% where it has remained. While The Fed has pinned The Fed Funds Target Rate at 0.25%, the 10-2 slope has continued to rise, partly due to the various quantitative easing programs starting in December 2008. Quantitative Easing 1 (QE1, December 2008...

NEW YORK (MarketWatch) -- Rising Treasury yields are causing some hand-wringing over the market's ability to absorb the large amounts of debt the U.S. has to sell, but not at high-profile Treasury market bulls such as Goldman Sachs and HSBC. They and others remain unfazed by the recent rise in bond yields, forecasting instead that weak economic growth and tame inflation will spur demand for low-risk U.S. government debt later this year and force yields back down again. "The recent move (higher) is a buying opportunity...I don't think a sustained break above 4.0% in the 10-year Treasury yield will happen,"...

A rapid rebound in credit markets this year has lured Americans into putting more of their savings into bond funds, which has helped push prices higher and bring in more cash. High-yield corporate bonds have jumped nearly 49% this year. If investors expect a repeat performance, they're in for an unhappy surprise, said Ashish Shah, Barclays co-head of global credit strategy. "There's money coming in from investors looking for the next 49% to happen, and it so obviously isn't going to happen," Shah said. The problem for bond buyers is actually a good thing: the start of robust economic growth

WASHINGTON (Reuters) - The U.S. Air Force on Monday endorsed the Pentagon in its plan to end production of Lockheed Martin Corp's top-of-the-line F-22 fighter jets after having pushed to buy more for years. "This is the time to make the transition from F-22 to F-35 production," Air Force Secretary Michael Donley and General Norton Schwartz, the service's top uniformed officer, wrote in an opinion piece in the Washington Post.

In a once-lost forest in Africa, six animal species new to science have been discovered, members of a two-month expedition now reveal, including a bat, a rodent, two shrews and two frogs. "If we can find six new species in such a short period, it makes you wonder what else is out there," said Wildlife Conservation Society researcher Andrew Plumptre. The bat appears to be a kind of horseshoe bat (genus Rhinolophus), known for the large horseshoe-shaped "nose leaves" used for directing their ultrasound. These new species were discovered in an expedition from January and March 2007 into woods just...