US Treasuries
- Friday’s UST 10y range: 4.31% – 4.40%, closing at 4.40%
Upcoming US Treasury Supply
Tentative Schedule of Treasury Buyback Operations
From our Arbor Data Science Desk: TIPS Report – 12/13/2024
On deck: UST 5y TIPS (Reopening) Auction, Thursday, 12/19/2024
TRACE Volumes
Date TIPS (bln) TIPS % <=5yrs UST’s Tot Par (bln)
12/2 16.7 60% 1059.7
12/3 19.5 58% 931.4
12/4 12.7 62% 873.0
12/5 11.4 46% 771.2
12/6 11.8 72% 696.5
12/9 12.5 60% 683.9
12/10 10.9 50% 885.9
12/11 75.6(CPI) 95% 1069.4
12/12 18.8 64% 868.7
Intraday Commentary from Jim Bianco
The 10y 3m curve uninverted today (story above). If the uninversion holds, this will be the first time it has ever uninverted via bear steepener.
It was been inverted for 752 trading days. It hit its maximum inversion on May 3, 2023 (about a month after Silicon Valley Bank blew up). From that point, 590 trading days to uninvert.
The right-hand columns, 10-year rose 103 bps while the 3-month declined 88 bps.
Since this is the first time via a bear steepener, and I believe that matters. So, no historical examples.
That said, I would argue that a bear steepener represents a renewed inflation fear as the driver of the uninversion is higher rates DESPITE lower short rates (or a rejection of the Fed cutting).
The typical bull steepener is all rates falling with short rates falling faster over a fear of slowing growth/recession.
7 day tick chart of the 10-year yield.
Why have yields rocketed higher by more than 25 bps in the past week? I’ve been arguing that the economy (top line) is ok and big fiscal stimulus is coming with Trump (tax cuts and deregulation). The economy does not need monetary stimulus. All Fed cuts are doing is raising inflation worries.
So what happened this week? Neither the payroll report (Dec 6) nor the CPI report (Dec 11) were strong enough to stop the Fed from cutting next week.
So, all systems go for a rate cut next week, and bonds are responding by tanking (price) and driving up their yield. If the Fed does not see the inflation problem they are creating, then sell bonds.
Want a bond rally? Then Powell should hint at his presser next week that the rate cut cycle is now done. But that would also mean he is admitting the Fed has been engaged in a policy error since September.
It is unclear that he believes this. So, I look forward to his explanation of rising long-term yields since the Fed started cutting in September, the 10-year is now up 80 basis point over this period. No other rate cutting cycle of the last 40+ years has seen long rates soar like this.
In Other News…
The New York Times: Trump Backs Dockworkers in Dispute Over Automation
The president-elect’s intervention could help the longshoremen’s union win concessions and avoid the resumption of a strike on East and Gulf Coast ports.
Without a deal, the I.L.A. could go back on strike, potentially closing economically crucial ports just a few days before Mr. Trump takes office.
U.S. News: Gen Z Severely Delinquent on Credit Card Debt
In a world where inflation and a high cost of living are stressing many Americans’ budgets, the temptation is high to turn to credit cards to manage purchases. Unfortunately, that means that credit card debt is high, as well.
Arbor Data Science:
Upcoming Economic Releases & Fed Speak
- 12/16/2024 at 8:30am EST: Empire Manufacturing
- 12/16/2024 at 9:45am EST: S&P Global US Manufacturing PMI & S&P Global US Services PMI & S&P Global US Composite PMI
- 12/17/2024 at 8:30am EST: Retail Sales Advance MoM & Retail Sales Ex Auto MoM
- 12/17/2024 at 8:30am EST: Retail Sales Ex Auto and Gas & Retail Sales Control Group
- 12/17/2024 at 8:30am EST: New York Fed Services Business Activity
- 12/17/2024 at 9:00am EST: Bloomberg Dec. United States Economic Survey
- 12/17/2024 at 9:15am EST: Industrial Production MoM & Capacity Utilization & Manufacturing (SIC) Production
- 12/17/2024 at 10:00am EST: Business Inventories & NAHB Housing Market Index
- 12/18/2024 at 7:00am EST: MBA Mortgage Applications
- 12/18/2024 at 8:30am EST: Building Permits & Housing Starts
- 12/18/2024 at 8:30am EST: Housing Starts MoM & Building Starts MoM & Current Account Balance
- 12/18/2024 at 2:00pm EST: FOMC Rate Decision
- 12/18/2024 at 2:00pm EST: Fed Interest on Reserve Balances Rate
- 12/19/2024 at 8:30am EST: GDP Annualized QoQ & Personal Consumption
- 12/19/2024 at 8:30am EST: GDP Price Index & Core PCE Price Index QoQ & Philadelphia Fed Business Outlook
- 12/19/2024 at 8:30am EST: Initial Jobless Claims & Initial Jobless Claims
- 12/19/2024 at 10:00am EST: Leading Index & Existing Home Sales & Existing Home Sales MoM
- 12/19/2024 at 11:00am EST: Kansas City Fed Manf. Activity
- 12/19/2024 at 4:00pm EST: Total Net TIC Flows & Net Long-term TIC Flows
- 12/20/2024 at 8:30am EST: Personal Income & Personal Spending & Real Personal Spending
- 12/20/2024 at 8:30am EST: PCE Price Index MoM & PCE Price Index YoY
- 12/20/2024 at 8:30am EST: Core PCE Price Index MoM & Core PCE Price Index YoY
- 12/20/2024 at 10:00am EST: U. of Mich. Sentiment & U. of Mich. Current Conditions & U. of Mich. Expectations
- 12/20/2024 at 10:00am EST: U. of Mich. 1-Yr Inflation & U. of Mich. 5-10 Inflation
- 12/20/2024 at 10:00am EST: Kansas City Fed Services Activity