Written by Peter Baden, CFA, Chief Investment Officer
Headlines of the Week
What started out as potentially busy and exciting, turned into a relatively quiet summer week. The US Treasury yield curve continue to flatten, marking almost two months of steadily lower long rates. Since June 3rd the 10-year Treasury yield has fallen almost 40 basis points, but only about 4 basis points in the last week. With the slowing rally in bonds, it seems traders who were counting on a steeper curve have righted their positions, preparing for the next move.
Headlining the economic news in the week was the GDP report. While headline GDP growth of 6.5% missed economist’s consensus estimates of 8.5%, consumer spending grew significantly at 11.8%. Not surprisingly international sales and inventories held back GDP growth. At this rate, GDP activity could return to peak much sooner than the estimated three years Fed Policy makers expected back in March 2020.
The Federal Reserve Open Market Committee meeting was held this week. Statements and news conferences held little surprise (Something the Fed Governors are getting better about). The Fed Governors continue to stress, recent inflation readings are “Transitory”. However, they concede, some of this transitory inflation may be somewhat sticky going forward. With the GDP report, tempered by the rise in infections from the COVID Delta variant, the Fed Chairman said they are moving closer to when they can start reducing their massive support for the US economy, but there is still some way to go.
Next week we get the readings on manufacturing with ISM on Monday, Factory Orders on Tuesday. Last but not least jobs data will be release Friday with economists estimating a 5.7% Unemployment Rate.
Chart of the Week
As of: 7/30/2021
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Disclosures
Indexes used for AAA Municipal Yields
2 Year: BVAL Municipal AAA Yield Curve (Callable) 2 Year (Symbol: CAAA02YR BVLI)
5 Year: BVAL Municipal AAA Yield Curve (Callable) 5 Year (Symbol: CAAA04YR BVLI)
10 Year: BVAL Municipal AAA Yield Curve (Callable) 10 Year (Symbol: CAAA10YR BVLI)
30 Year: BVAL Municipal AAA Yield Curve (Callable) 30 Year (Symbol: CAAA30YR BVLI)
Indexes used for US Treasury Yields
2 Year: US Generic Govt 2 Year Yield (Symbol: USGG2YR)
5 Year: US Generic Govt 5 Year Yield (Symbol: USGG5YR)
10 Year: US Generic Govt 10 Year Yield (Symbol: USGG10YR)
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