Latest news with #FedFunds
Yahoo
11 hours ago
- Business
- Yahoo
Fed's hand may be forced as disinflation builds, Macquarie says
-- At its meeting last month, the Federal Reserve delivered a hawkish pause as it flagged growing risks of higher inflation and slower growth, but the trend of disinflation is likely to force the Fed's hand into a more dovish stance at the June meeting, paving the way for a rate cut this year. 'We think that the Fed will lean toward a more 'dovish' message on June 17 than it did on May 7, and the prospect for a rate cut in 2025 has strengthened a bit,' Macquarie strategists wrote, pointing to the recent decline in US inflation and signs of a weakening labor market. While the April JOLTS report showed a modest pick-up in job openings, Macquarie cautions that other indicators—including today's weak ADP report and a drop in private-sector quit rates—signal the US labor market is losing momentum. 'The improvement in April openings seemed to contradict the poorer hiring signals from the Fed's recent regional surveys, the decline in job security measures in consumer surveys, and even third-party surveys of job openings,' the strategists said, adding that the ADP report showed a mere 37,000 in net hiring. Macquarie warns not to put too much weight on the JOLTS report, noting, 'we shouldn't take the JOLTS report from yesterday too seriously, lest we be surprised by weakness in this Friday's May employment report.' For the Fed, the unemployment rate remains the 'paramount single driver' for its disposition toward rates, and any break above the recent 4.1%-4.2% range could be pivotal. On the inflation front, Macquarie sees underlying price trends in the US as 'again disinflationary,' especially after the latest PCE inflation report. 'We think that with the June 18 FOMC meeting, some of the Fed's caution about cutting the Fed Funds rate target will start to fade, as the Fed considers that—if we abstract from the tariffs—underlying price trends in the US are again disinflationary,' they wrote. Tighter credit conditions are also weighing on the outlook, as banks continue to tighten lending terms amid policy uncertainty and mark-to-market losses on Treasury holdings. 'Much of this, we think, is being driven by a suppression of consumer credit, as banks tighten lending terms,' Macquarie said. Related articles Fed's hand may be forced as disinflation builds, Macquarie says Bond yields fall as rate cut bets rise 'Illegal' metal tariffs won't receive retaliation yet, says Carney
Forbes
7 days ago
- Business
- Forbes
Big, Beautiful Bill Builds Contrarian Case For Bonds
The 'big, beautiful bill' has turned into a bitter pill for bonds. As you've undoubtedly heard, bond buyers aren't exactly thrilled about lending more money to a $36 trillion debtor that's digging itself deeper into a financial ditch. Prior to the proposed 'One Big Beautiful Bill Act' (OBBBA), the Congressional Budget Office (CBO)—famous for crunching numbers through rose-colored glasses—already projected a $1.9 trillion deficit for 2025. Now, the CBO estimates that the current House-passed version of OBBBA will add an extra $3.8 trillion to the national debt over the next decade. This leaves Uncle Sam staring into a $40 trillion hole, deepening by roughly $2 trillion each year. Treasury bond yields spiked recently as buyers vanished. Last Wednesday, a seven-week stock rally reversed midday when the U.S. struggled through a weak $16 billion auction of 20-year bonds. The tepid demand for these long-dated Treasuries confirmed what many already thought—with Uncle Sam spending like a drunken sailor, who'd lend him more? Thus, the popular mainstream conclusion: The U.S. has entered its final 'doom loop' debtor stage. Rates are rising as bond investors demand higher compensation to offset the credit risk posed by Uncle Sam's ugly finances (you know, $40 trillion…). Higher rates increase the country's financing costs, which worsens the debt situation, which leads investors to demand even higher rates, and so forth. This implies we should avoid bonds entirely. To borrow a concept from billionaire investment manager Howard Marks, this is a 'first level' interpretation. It is accurate on paper but misses the nuances. In a truly free market, the 'bond doom loop' narrative would be valid. But in the real world that you and I inhabit, my fellow contrarians, we must elevate our thinking to the second level for more nuanced consideration. Here, we recognize the 'Quiet QE' the U.S. Treasury began under then-Secretary Janet Yellen. She subtly influenced the bond market by issuing short-term debt rather than long-dated Treasuries. This maneuver reduced the supply of long-term bonds, thereby suppressing long-term yields. (The same number of buyers chased fewer long-dated bonds, pushing prices higher and yields lower.) This strategic pivot was significant. At the end of 2019, short-term bills represented just 15% of marketable U.S. debt. By 2024, Yellen funded 75% of the deficit via the short end of the yield curve. Two summers ago at Contrarian Outlook, we identified this Quiet QE interplay between Yellen and Fed Chair Jay Powell. Renowned economist Nouriel Roubini published a paper 12 months later identifying this 'activist Treasury issuance' (ATI) as Uncle Sam's favorite plumbing tweak. Roubini confirmed the U.S. Treasury is, shall we say, finessing debt issuance to nudge longer-term rates lower than they'd naturally be. Without ATI, the 10-year Treasury yield would be 30 to 50 basis points higher—equivalent to up to two rate hikes in the Fed Funds rate. In other words, the 10-year yield would top 5% today if not for Quiet QE. And the cost of borrowing for business (lending rates) and individuals (mortgage rates) would be notably higher. Current Treasury Secretary Scott Bessent publicly criticized this tactic but has quietly continued it. Year-to-date, the Treasury has financed 80% of its funding needs through short-term issuance. If we witness more weak auctions like last week's, Bessent could very well lean even harder into lower cost short-term borrowing. Short-term rates are influenced primarily by the Federal Reserve rather than the broader bond market. And Jay Powell's term ends in less than a year, when President Trump will likely appoint an ally like Kevin Warsh, Kevin Hassett, or Judy Shelton, who will cooperate with the administration to lower the Fed Funds rate. A lower Fed rate will in turn reduce short-term Treasury yields. With 80% of issuance short term, this will significantly lower debt-service costs. In fact, this is already happening. Fellow financial author Mel Mattison notes that total interest on the public debt is declining year-over-year despite a ballooning deficit! Mel reminds us that Powell didn't start cutting the Fed Funds Rate until last September. So, this fall the decline in interest payments will really start showing up in the year-over-year data. More evidence against the case of the 'interest rate doom loopers.' Does this fix the giant US debt problem? Of course not. But Mel's point is that our politicians and central bankers have 'creative options' at their disposal. Vanilla investors tend to glance at the surface and move on. But we careful contrarians appreciate the nuances and gear our income portfolios accordingly. The somewhat-secret swap to short-term debt should bring a ceiling on long-term yields. Bessent, after all, is not going to tolerate a higher 10-year yield that boosts interest on the debt. He wants a cap on long rates, which will provide a floor beneath the bond market. He'll get one by limiting long-dated bond supply. Viewed through this lens, our DoubleLine bond funds look attractive here. If long rates are near a high watermark, then the prices of the paper owned by DoubleLine will enjoy a yield-driven tailwind. DoubleLine Yield Opportunities Fund (DLY) yields 9.1% and trades at a 2% discount to its net asset value (NAV), while DoubleLine Income Solutions Fund (DSL) pays an 11% yield and trades at par. Doubleline CEFs Contrarian Outlook These two bond portfolios are also supported by a strengthening economy. The negative first-quarter GDP print was likely the most bullish development for the real economy. Trump and Bessent will make sure we don't experience negative GDP growth in the second quarter. Consecutive negative quarters would officially signal a recession. They don't want this scarlet letter heading towards the midterms. Trump and Bessent no longer need an economic slowdown to push long-term yields lower—they'll simply work with the short end of the bond market from here. Political pressure on Powell, the 'lame duck' , will ease. As will pressure on the long end of the curve. Let's ignore the mainstream Chicken Littles declaring the end of bonds. These 'first level' thinkers overlook the power of coordinated Treasury and Fed policy. Here at Contrarian Outlook we recognize the monetary 'creativity'—and profit from it. Let's keep enjoying these DoubleLine monthly payers yielding up to 11%. Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever. Disclosure: none
Yahoo
29-03-2025
- Business
- Yahoo
5 Costly Mistakes To Avoid When Choosing the Right Bank for Your Savings Account
Choosing the right bank to open a savings account might seem simple, but the wrong choice can cost consumers money. Many consumers overlook important account features that could help their savings grow or stay with the same bank despite higher fees and minimum withdrawals because the bank is familiar. For You: Try This: However, there are smart money moves consumers can make to help make their savings work for them. Here are five costly mistakes to avoid when choosing the right bank for your savings account. Many individuals park their savings in a traditional bank savings account and settle for minimal interest rates. According to a recent Vanguard survey, 54% of Americans save in traditional bank savings accounts — and 39% in checking accounts — where the average interest rates are roughly 0.41%. 'Keeping your hard-earned savings in a low-yielding account could mean leaving significant interest earnings on the table,' said Tiana Patillo, CFP, financial advisor manager at Vanguard. 'Make sure that the account you're considering offers a competitive yield.' The Vanguard survey also found that 60% of Americans didn't completely understand how interest rates impact their savings, and 57% reported that their savings are earning less than 3% interest. 'The yield, or annual [percentage] yield (APY), of a particular account tells you how much interest or return you can expect to earn on your savings over a year,' Patillo said. 'Saving in an account with a higher yield can help you reach your goals faster, and that probably means considering options outside of your [current] bank.' Consider This: Savings accounts aren't set in stone. Shopping around for the right savings account could help consumers maximize their purchasing power. 'With the Federal Reserve's periodic revision of the Fed Funds rate, you'll notice that banks often reciprocate by adjusting their savings accounts interest rates,' said Gary Zimmerman, founder and CEO at MaxMyInterest, a platform for earning higher yields on FDIC-insured cash. Zimmerman explained, 'However, not all banks do this simultaneously or by similar margins. As banks continually change their rates, rate comparison platforms can help you identify the top rates. Many banks are paying an interest rate that's less than the inflation rate, which means you're actually losing reach purchasing power every day.' Choosing a non-insured bank or fintech platform could put a consumer's money at risk in the event of a bank failure. Banks with NCUA or FDIC insurance cover up to $250,000 per depositor. 'Putting your money into a bank that isn't protected by one of these insurance programs means your money won't be protected should that institution fail,' said Susan Espinosa at Skyla Credit Union. 'Some credit institutions, including Skyla Credit Union, provide additional deposit insurance above NCUA protections, offering members up to $500,000 insurance per person.' Monthly maintenance fees, minimum balance requirements or transfer limits can quietly drain savings account balances if consumers aren't paying attention. 'When comparing savings accounts, read the fine print when it comes to monthly fees and minimum balances,' said Erika Kullberg, a personal finance expert. 'Unexpected fees can quickly wipe out your interest earned. Compare terms and conditions, as well as interest rates.' Kullberg said consumers should consider savings accounts with low or no fees and low or no minimum balance requirements. 'If the interest rate and terms are right, I would prioritize accounts with mobile banking features and those that will link to any budgeting or money management apps you use,' Kullberg said. Some savings accounts limit how often consumers can withdraw money or charge for excessive transfers, which can be costly for those who need quick access in an emergency. 'Make sure you can easily access your savings in times of urgency by linking your savings to your checking,' said Andrea Woroch, a consumer finance and savings expert. 'You should also look into maximum withdrawal limits in the event you plan to access your cash more frequently.' In addition, transfer speed and the ease by which consumers can access their money matters. 'If your account is with a different bank, make sure you can move your funds quickly and easily between banks,' said Hillary Seiler, a personal finance expert and CEO of Financial Footwork. 'Look for same-day or next-day transfer options. A reliable online platform and a user-friendly app are a must if you want to manage everything seamlessly.' More From GOBankingRates6 Big Shakeups Coming to Social Security in 2025 This article originally appeared on 5 Costly Mistakes To Avoid When Choosing the Right Bank for Your Savings Account Sign in to access your portfolio
Yahoo
12-02-2025
- Business
- Yahoo
A Hot Inflation Print Is Set to Derail S&P 500's Run to Record
(Bloomberg) -- The US stock rally is already on shaky ground due to tariffs and an uncertain outlook about artificial intelligence. Add a hot inflation print to the mix, and the market will sell off. Saudi Arabia's Neom Signs $5 Billion Deal for AI Data Center Nice Airport, If You Can Get to It: No Subway, No Highway, No Bridge The Forgotten French Architect Who Rebuilt Marseille Sin puente y sin metro: el nuevo aeropuerto de Lima es una debacle In New Orleans, an Aging Dome Tries to Stay Super That's according to the trading desk at JPMorgan Chase & Co. Market Intelligence, who estimate the S&P 500 will fall as much as 2% in the case consumer prices rose 0.4% or more in January from a month prior. 'Expect the bond market to react violently as it shifts its view to Fed Funds not being restrictive and the most likely next action of the Fed to be a hike rather than a cut,' the team led by Andrew Tyler wrote in a note. 'The move in bond yields would pull the USD higher, further pressuring stocks.' A lot is riding on the figures due 8:30 a.m. New York time. The market has overreacted to US consumer sentiment and inflation expectations data from the University of Michigan on Friday, Tyler said. 'That put an over-emphasis on the CPI print,' they added. The strategists are tactically bullish on US equities, expecting the above-trend economic growth in the US, positive earnings and a neutral Federal Reserve with a dovish tilt. A slightly hotter print would refute that outlook, they said, even though the most likely outcome is for the monthly inflation figure to come between the 0.27%-0.33% range. The consensus estimate is for a 0.3% rise in month-on-month CPI, while the options implied move for the S&P 500 Index is just below 1%. Last month, the data triggered an outsized upward move for the stock market, and chances are that any small deviation from the forecast will again cause volatility. After a strong two-year rally for the S&P 500, investors are now grappling with the threat of Donald Trump's tariffs potentially stoking inflation higher, persistently elevated interest rates and lofty big tech valuations that are increasingly being questioned. Fed Chair Jerome Powell said the central bank doesn't need to rush to adjust interest rates on Tuesday, sending bond yields higher. Swap markets currently price in just one more rate cut this year. Goldman Sachs Group Inc.'s Dominic Wilson said their forecast for the inflation print is slightly above the consensus. 'If we print around the consensus, there could be some mild relief,' Wilson, a senior markets advisor, wrote in a note. 'We do think the underlying inflation pressures ex-tariffs are likely to prove more benign than the market expects, but tariffs are likely to offset that in the near-term and we've raised our inflation forecasts recently. Markets have priced some of that risk already.' Why Fast Food Could Be MAHA's Next Target Trump's Tariffs Make Currency Trading Cool Again After Years of Decline The Game Changer: How Ely Callaway Remade Golf Trump Promised to Run the Economy Hotter. His Shock and Awe May Have a Chilling Effect Orange Juice Makers Are Desperate for a Comeback ©2025 Bloomberg L.P.
