Market Structure Notes — Helmholtz Watson TL;DR The Setup The U.S. 10-year yield is holding near ~4.4–4.5%, close to the top of its 2026 range, even as policy expectations remain stable. If term premium is rising, the next question is straightforward: What’s pushing it higher? The answer is increasingly clear: Supply. While markets remain focused on the next move from the Federal Reserve, something more structural is happening in the background: Treasury issuance is accelerating. Deficits remain elevated. Funding needs … Continue reading “Why Treasury Supply Is Driving Yields Higher — Not the Fed”
The Term Premium Is Back — And Markets Aren’t Ready
Market Structure Notes — Helmholtz Watson TL;DR The Setup If long-end yields are rising even as central banks pause, the obvious question is: What’s driving them? The answer is increasingly clear: Term premium is back. What Is Term Premium (And Why It Matters Now) Term premium is the compensation investors demand for holding long-duration bonds instead of rolling short-term debt. For years, that premium was compressed—by design. Quantitative easing: In some cases, term premium turned negative. That regime is ending. … Continue reading “The Term Premium Is Back — And Markets Aren’t Ready”
Why Bond Yields Keep Rising Even as Central Banks Pause
Market Structure Notes — Helmholtz Watson A quiet regime shift with major trading implications TL;DR The Pause That Wasn’t April’s central bank meetings delivered a familiar message. The Federal Reserve, European Central Bank, Bank of England, Bank of Canada, and Bank of Japan all leaned on the same script: uncertainty around energy prices, sticky inflation, and a data-dependent path forward. Policy rates were largely unchanged. If you only listened to central banks, you’d think markets were on hold. Across developed … Continue reading “Why Bond Yields Keep Rising Even as Central Banks Pause”
Federal Reserve Confirmed Not in a Rush to Ease Rates at FOMC
The Federal Reserve kept rates unchanged in a target range of 5.25-5.50% in unanimous vote at their May FOMC, which was expected. Fed Chair Powell calmed fears during his press conference where he stated that it was “unlikely that the next policy rate move will be a hike.” The Fed tweaked their statement to recognize “the lack of further progress toward the 2% inflation objective” and to signal the QT tapering on Treasuries from $60 billion to $25 billion ($30 … Continue reading “Federal Reserve Confirmed Not in a Rush to Ease Rates at FOMC”
Federal Reserve Kept Rates Unchanged, Surprises with Pivot Towards Rate Cuts
The Federal Reserve kept rates unchanged in a target range of 5.25-5.50% in unanimous vote at their December FOMC, which was expected. The Fed’s move in the Summary of Economic Projections (SEP) quarterly “dot plot” however caught markets by surprise. The median federal funds rate for 2024 was lowered to 4.6%, down from 5.4% in 2023. That points to the prospect of three rate cuts next year versus only two that were projected at the time of the September SEP. … Continue reading “Federal Reserve Kept Rates Unchanged, Surprises with Pivot Towards Rate Cuts”
Federal Reserve Kept Rates Unchanged; Eases Financial Conditions
The Federal Reserve kept rates unchanged in a target range of 5.25-5.50% in unanimous vote at their November FOMC. Fed said economic activity grew at a “strong pace” and inflation remains “elevated”. Minor statement changes added reference to tightened financial conditions, which just repeated Powell’s remarks from two weeks ago. Each meeting remains ‘live’ but not very convincingly. The effects of the eased financial conditions at a curiously vulnerable point for inflation risk it would appear. Yields came off and … Continue reading “Federal Reserve Kept Rates Unchanged; Eases Financial Conditions”
Federal Reserve Beige Book Highlights Labor Market Tightness Continued to Ease
The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of St. Louis based on information collected on or before October 6, 2023. The report said most Districts indicated little to no change in economic activity since the September report. Consumer spending was mixed, especially among general retailers and auto dealers, due to differences in prices and product offerings. Labor market tightness continued to ease across the nation. Most Districts reported slight to moderate increases in … Continue reading “Federal Reserve Beige Book Highlights Labor Market Tightness Continued to Ease”
Federal Reserve Kept Rates at 22-Year High 5.25-5.50% Range as Expected
The Federal Reserve kept rates unchanged in a target range of 5.25-5.50% in unanimous vote at their September FOMC and updated economic projections. The statement comes the day after yields on 10s and shorter tenors hit fresh highs for the year with the 2-yr yield reaching a level not seen since 2006 while the 10-yr yield hit a level not seen since November 2007. According to the CME FedWatch Tool, there is a 96.5% probability of no hike today. However, … Continue reading “Federal Reserve Kept Rates at 22-Year High 5.25-5.50% Range as Expected”
Federal Reserve Beige Book Highlights Consumers Exhausted Savings, Job Growth Subdued
The Federal Reserve released its Biege Book Wednesday prepared at the Federal Reserve Bank of Kansas City based on information collected on or before August 28, 2023. The report was consistent with economic growth being modest during July and August. Consumer spending on tourism was stronger than expected, surging during what most contacts considered the last stage of pent-up demand for leisure travel from the pandemic era. But other retail spending continued to slow, especially on non-essential items. Some Districts … Continue reading “Federal Reserve Beige Book Highlights Consumers Exhausted Savings, Job Growth Subdued”
Fed’s Powell at Jackson Hole; Inflation: Progress and the Path Ahead, the Market Response
Fed Chairman Powell’s speech from the Jackson Hole Symposium in Wyoming on Friday offered little new but those hoping so were disappointed. The Fed Chairman reiterated that the Federal Reserve is prepared for more rate hikes, though he cautioned they are in a position to “proceed carefully” when it comes to assessing incoming data. Powell acknowledged that the economy has not been cooling as expected, which could be viewed as a signal that more rate hikes are to come, or … Continue reading “Fed’s Powell at Jackson Hole; Inflation: Progress and the Path Ahead, the Market Response”