Fixed Income Focus: Bull Flattener Into Month-End...Payrolls Ahead
Treasury yields were lower this past week, and the curve was flatter. The market was very little changed through the first couple of days, but there was a better bid led by the long-end through the rest of the week in response to month-end demand, safe-haven flows amid Russia's slow motion invasion of Ukraine, and record low yields in Europe due in part to expectations of action by the ECB at the upcoming meeting.
The data calendar is especially busy during the holiday-shortened week ahead, capped off by Friday's Nonfarm Payrolls release.
Fixed Income Focus
US Economic Chartbooks
Please see our Economic Week Ahead Chartbook for a discussion of next week's economic releases provided in a visually friendly format that includes graphs, brief descriptions of SMR's forecasts, and links to detailed data previews. If you missed anything from last week, see our Economic Week in Review Chartbook for a look back at the releases with links to full analyses.
Global Equity Perspective: Despite S-T Leadership, L-T EU Lag Flashes Red
Last week's reflexive move back into risk assets brought with it a spike in short-term correlations between global equity benchmarks and the S&P 500 (see the top row on the correlation matrix on page 6 for more detail). At the same time, however, the rebound in global equities exposed some serious divergences against the US equity market's all-time highs. As has been our long-standing view, we expect the area immediately surrounding SPX 2000 to mark the high-end of the range for much longer than market participants have become accustomed to. While the secondary inefficiencies we are now seeing leave us quite comfortable with this view, we may still be 1 2 - weeks away from finding the cycle highs. For the S&P 500, this means the case for this terminal advance to stretch to between 2000 and 2020 only comes into question below 1984.75, but stays valid above 1944.90.
Yellen in Brief - 'What Is a Monetary Policymaker to Do?'
* A framework for answering questions about the labor market, not the answers themselves.
* Labor force participation rate, part-time for economic reasons, and hires and quits highlighted as measures to assess labor market slack, but not the only ones.
* FOMC on track to end asset purchases at October 28-29 meeting; timing of lift off sooner if economic data good, later if data is disappointing.
What Did We Learn About the Normalization Process from The FOMC Minutes
The Minutes of the July 29/30 FOMC included a further evolution of thought from the previous meeting. The views expressed at the July meeting were consistent with yesterday's commentary; More on the Exit Strategy. Here we detail the key points.
Federal Reserve Research