Wednesday, March 24, 2021 |
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MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: George Morris • Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino Jeff Goble • Nicole Burczyk • Natalie Regan • Aaron Stoffer • David Farris • Lonnie Harris Brian Schaff • Josh Kiefer • Robert Schuyler • Tom Toburen • Aaron Hemphill |
| US Treasury Market | |||||||||||
| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 03/17/21 | 0.01 | 0.02 | 0.05 | 0.07 | 0.13 | 0.29 | 0.80 | 1.27 | 1.63 | 2.32 | 2.42 |
| 03/18/21 | 0.01 | 0.01 | 0.03 | 0.08 | 0.16 | 0.33 | 0.86 | 1.35 | 1.71 | 2.36 | 2.45 |
| 03/19/21 | 0.01 | 0.01 | 0.03 | 0.07 | 0.16 | 0.33 | 0.90 | 1.38 | 1.74 | 2.36 | 2.45 |
| 03/22/21 | 0.02 | 0.03 | 0.05 | 0.06 | 0.15 | 0.32 | 0.87 | 1.34 | 1.69 | 2.29 | 2.38 |
| 03/23/21 | 0.02 | 0.01 | 0.04 | 0.08 | 0.15 | 0.31 | 0.83 | 1.29 | 1.63 | 2.24 | 2.34 |
Powell’s Message to the Markets
Did Powell assure the markets? It’s hard to tell as everyone thinks this will be a hard road to hoe.
In terms of tightening, Powell stated that the first step will be the tapering of the $120B of monthly asset purchases which the open market committee has pegged to “substantial further progress” in employment and inflation.
Another part of Powell’s message focused on Fed forecasts and how they will respond to inflation pressure.
The median of the combined forecasts showed inflation pushing a bit over 2%, but falling closer to the 2% target in 2022 and 2023.
Economic growth is expected to roar back in 2021 thanks to the large amount of Fiscal stimulus. Yet the projection of a majority of voting FOMC members do not see a need for higher rates. Is this correct??
Powell’s argument is that because inflation expectations are anchored at 2%, the Fed can allow the economy to “run hot” - deliver a more inclusive and strong recovery without major price inflation.
The 10 year UST started out the week of 03/15/21 @ 1.61%. On Wednesday, (day of Powell’s comments) it was about 1.67%, and Friday 1.72%. The Treasury market would suggest inflation is near while the FOMC is not entirely convinced.
Who’s side are you on?
Source: Bloomberg LP 03/23/2021
Below is the 10 year curve over the last year (pandemic) starting at about 1.15%, down to .50%, now 1.73%:
Source: Bloomberg LP 03/23/2021
Complete Treasury yield curve 03/19/21 versus 03/19/20:
Source: Bloomberg LP 03/23/2021
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