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Could rates really hit 6%?

A few weeks ago, anyone who suggested the Federal Reserve might take the federal funds rate toward 6.0 per cent would have been written off as a scaremonger.

When the data changes after the decision

Core personal consumption expenditures (PCE) prices rose 0.6 per cent in January, lifting the annual rate to 4.7 per cent and giving policymakers at the Eccles Building a nasty surprise.

Did shoppers really spend 3% more in January?

US retail sales jumped 3.0 per cent in January from December, ending talk of an imminent consumer slump and sending economists back to their growth models.

Private credit's borrowers are feeling the squeeze

The Secured Overnight Financing Rate (SOFR) now resets above 4.55 per cent, up from almost nothing a year ago, and private credit funds are paying their limited partners double-digit gross yields.

Valentine's Day: Markets still love rate cuts. The Fed doesn't love them back

January's consumer prices rose at a 6.4 per cent annual pace, the Bureau of Labor Statistics said on Valentine's Day, and markets' eighteen-month infatuation with Federal Reserve rate cuts was once again shown to be one-sided.

Short-term bonds are having a terrible month

Super Bowl: $7m for 30 seconds, and what it says about confidence

Thirty seconds of advertising during Super Bowl LVII, between the Philadelphia Eagles and the Kansas City Chiefs, cost a record $7 million.

Last year's inflation just got rewritten

On 10 February the Bureau of Labor Statistics published its routine annual seasonal revisions to the consumer price index, and in doing so rewrote the inflation record for late 2022.

517,000 jobs and the end of the rate-cut dream

The Bureau of Labor Statistics reported 517,000 net new payroll jobs for January, and the unemployment rate fell to 3.4 per cent, its lowest since May 1969.

Meta's new growth story: buying back its own shares

Meta Platforms reported bland fourth-quarter revenue and a lacklustre outlook, and its shares rose 23 per cent in a day, adding roughly $90 billion of market value in a few hours.

How the Treasury is quietly pumping cash into markets

Federal Reserve officials have spent the winter telling conferences that quantitative tightening (QT) is running at its full cap of $95 billion a month.

The economy grew 2.9%. Demand barely grew at all

The advance estimate put fourth-quarter US GDP growth at 2.9 per cent annualised, comfortably ahead of forecasts, and commentators were quick to praise the economy's resilience.

America hits its debt limit again. The countdown starts

The United States hit its $31.4 trillion statutory borrowing limit on 19 January, and Treasury Secretary Janet Yellen began the "extraordinary measures" that keep the government paying its bills.

Lunar New Year: China's reopening lifts the yuan

The yuan had a good Lunar New Year. Having flirted with 7.35 to the dollar in late October, the onshore and offshore rates rallied back toward 6.78, one of the fastest percentage recoveries on record.

Banks' easy profits are about to end

America's largest commercial banks reported record headline profits for the fourth quarter, lifted by a big rise in net interest income (NII).

Japan spends trillions to defend one number

The Bank of Japan has been buying government bonds at a record pace, more than ¥5 trillion in a day, to defend its new yield ceiling, and it now holds more than half of the entire 10-year JGB market.

The inflation number the Fed secretly cares about

US consumer prices rose 6.5 per cent in the year to December, confirming that headline inflation is coming down from its summer peak.

Europe's lucky warm winter

Benchmark Dutch Title Transfer Facility (TTF) gas prices have fallen from peaks above €340 per megawatt-hour to below €80, and European boardrooms have let out a large sigh of relief.

Tech's layoffs are really about profits

Amazon announced 18,000 corporate layoffs as 2023 began, following similar cuts at Meta, Salesforce and Alphabet.

Germany's bond shortage is finally easing

Two-year Bund swap spreads blew out towards 100 basis points at the height of the collateral squeeze in 2022, as traders paid steep premiums to borrow physical German government bonds.

New Year: Everyone expects a recession. That's the warning sign

About 65 per cent of economists surveyed at Wall Street banks and independent research firms expect a US recession within the next twelve months, and that degree of agreement should worry any experienced investor as 2023 begins.

New Year's Eve: The year the classic portfolio failed

The classic 60/40 portfolio lost about 17 per cent in 2022, a historic drawdown that left wealth managers and pension trustees with nowhere liquid to hide.

Is the recession alarm broken?

The gap between 10-year and 3-month US Treasury yields inverted in late 2022 to depths not seen in four decades, pushing the New York Federal Reserve's recession probability model towards 38 per cent.

How long can shoppers keep spending their pandemic savings?

Consumer spending held the US economy up through 2022, in the face of the fastest monetary tightening in forty years.

Boxing Day: The $816bn problem of returned presents

The National Retail Federation expects US consumers to return about $816 billion of merchandise in 2022, and the post-holiday flood of returns is where retail margins go to die.

Christmas: Why markets go quiet — and fragile — at year-end

Markets slow to a crawl in the last days of the trading year, and casual observers take that for calm.

The debt bill companies have pushed to 2024

US junk bond issuance struggled to pass $100 billion in 2022, the lowest annual total since the Lehman Brothers collapse in 2008.

Japan surprises everyone, and bonds everywhere feel it

The Bank of Japan unexpectedly widened the permitted trading band for 10-year Japanese government bonds from ±0.25 to ±0.50 per cent, and bond markets around the world shook.

The Fed and the market disagree. Someone is wrong

The Federal Open Market Committee raised its policy rate to a range of 4.25 to 4.50 per cent in December and published projections showing a peak of 5.1 per cent in 2023.

Goods are getting cheaper. Services aren't

US consumer prices rose 7.1 per cent in the year to November, and markets took the figure with relief, mainly because core goods prices fell outright by 0.5 per cent on the month.

The companies that only survive on cheap money

Has the dollar peaked?

The dollar has fallen from its September peak near 114.8 on the DXY index to around 105, after a historic rise through 2022 that neatly reflected diverging monetary policy and America's stronger terms of trade.

Wages are rising — by how much depends on who you ask

Average hourly earnings rose 0.6 per cent in November, a strong monthly gain that sent bond-trading algorithms onto the defensive.

China reopens, and the world gets a new inflation problem

Markets have decided that China's eventual exit from zero-Covid will be pure good news for global inflation.

Cyber Monday: What the discounts say about inflation

Americans spent an estimated $11.3 billion online on Cyber Monday 2022, according to Adobe Analytics, a record in nominal terms for the annual shopping day.

Retailers ordered for a boom that never came

Target's operating margin fell to 3.9 per cent in the third quarter, from 8.6 per cent a year earlier, as the company cut prices hard to empty its warehouses.

Black Friday: Shop now, pay later, default sooner

US credit card balances reached $930 billion in the third quarter of 2022, according to the Federal Reserve Bank of New York's latest household debt report, up fifteen per cent on a year earlier.

Thanksgiving: Why your turkey cost 20% more

A classic Thanksgiving dinner for ten now costs an average of $64.05, according to the American Farm Bureau Federation's annual survey, twenty per cent more than it did a year ago.

The bond market is screaming recession

The gap between two-year and ten-year US Treasury yields reached minus seventy-five basis points in late November 2022, the deepest inversion since Paul Volcker was crushing inflation in the early 1980s.

Rents are already falling. Official data hasn't noticed

The shelter index in the US consumer price report rose 0.8 per cent in October, its steepest monthly rise in more than three decades, and no single line in the American economic data is doing more to mislead.

One good inflation report does not make a trend

Headline US inflation came in at 7.7 per cent for October, down from 8.2 per cent in September, and core inflation eased to 6.3 per cent.

Singles' Day: Alibaba stops showing its numbers

Alibaba did not publish its Singles' Day sales total on 11 November 2022, the first time in the festival's fourteen-year history that it has kept the number to itself.

FTX spent its customers' money. That was the business

FTX filed for Chapter 11 bankruptcy on 11 November, and its collapse will go down as one of the most brazen balance-sheet frauds in modern business.

$2trn is sitting at the Fed doing nothing

The jobs report that contradicts itself

Why slowing down could mean the Fed goes higher

Interest-rate futures are pricing a fourth consecutive 75-basis-point rise at the Federal Open Market Committee's November meeting, which would take the policy rate to 3.75 to 4.00 per cent.

Halloween: The scariest year for bonds in memory

The US Aggregate bond index is heading for a loss of close to 15 per cent this year, which would make 2022 the worst calendar year for bond investors since the founding of the republic.

Meta's spending spree just cost it a quarter of its value

Meta Platforms' shares fell by twenty-four per cent on 27 October, wiping out eighty-five billion dollars of market value, after management said capital spending in 2023 would rise to between $34 billion and $39 billion.

Is the world's safest market becoming hard to trade?

On 12 October Janet Yellen said the US Treasury was worried about a loss of adequate liquidity in the government bond market.

Diwali: India's gold habit is weighing on the rupee

The rupee has fallen past 83 to the dollar for the first time, and India's households are about to buy a great deal of gold.