Broaddus just reminded everyone that the Fed is going to raise rates. He is clear that the inflation data has got their attention and that the Fed is much more wary of inflation. |
Claims took people by surprise. It makes it clear the Fed has not gone too far. |
I'd be surprised if he gives us anything new in content. |
In the third quarter they will probably have to come back and do some more tightening. As things stand, they haven't really done enough to slow down the economy and get rid of inflation risk. |
It's hard to look at this report and be even more convinced that if housing slows down, there's nothing to replace it in terms of labor income. It leans slightly more to the bearish than the bullish side for the market. |
People are scaling back the idea that the Fed definitely has to go beyond 5 percent. |
That made a lot of people think that the Fed couldn't wait until March 20. |
The 10-year is licking its wounds. |
The bid-to-cover improved a lot, reflecting a reasonable appetite for the two-year notes. |
The data are a disaster for the recovery story. It suggests that once the stimulus to consumption fades there won't be the hiring there to replace it. |
The front end of the curve tried to rally a little bit and there was a trade down in the belly of the curve. We expect the Fed to cut rates another quarter-percentage point in January and for federal funds to be at 1.5 percent in the middle of 2002. We're looking for a recovery in the third quarter of next year. |
The inflation story embedded in this report is really not that bad. People are coming back into the labor force and wage pressures aren't showing, so this is generally good for bonds. |
The market is basically ignoring it. It's just the fact we've already sold off so much. |
The obvious point to take from this meeting is that the Fed is giving the bond market no indication they are close to being done. |
The path of least resistance is flattening. |