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The Aptus Blog

Market notes, charts, investment concepts, and timely market updates, directly from our investment team.

2024-05-02 · Bonds & RatesFOMC May 2024: I Don’t See the Stag or the FlationAs expected, the Fed kept its Funds rate range unchanged at a 5.25% – 5.50% level. Powell’s comments were less hawkish than feared, but there was disappointment expressed2024-04-25 · Bonds & RatesTraditional Bonds Still Not IdealThe flexible components of core CPI have been in deflationary territory over the past year (blue line in the chart below). The stickier components of core CPI, however, a2024-04-18 · Bonds & RatesThe Role of Bonds in an Inflationary WorldFor decades, investors have treated bonds as a cornerstone of portfolio diversification, largely based on their performance during the late 20th century. From the early 22024-04-11 · Bonds & RatesTransitory DisinflationUS inflation topped forecasts for a third straight month. Both the Core and the Headline consumer price index increased 0.4% from February. Source: Stifel as of 04.10.2022024-03-27 · Bonds & RatesLot of Moving Parts in the Bond MarketTreasury Issuance Back at Pandemic Levels As we’ve noted over the last year, the current level of US fiscal deficits, given a strong economy and low unemployment, is unch2024-03-21 · Bonds & RatesMarch 2024 FOMC: Dovish ToneThe FOMC voted unanimously to leave their benchmark rate unchanged in the target range of 5.25%-5.5%. Source: Bloomberg as of 03.20.2024 The big surprise was the willingn2024-03-13 · Bonds & RatesMarch CPI: Inflation Still StickyInflation Stabilizing Above 3% The U.S. CPI rose +0.4% m/m (3.2% y/y) & core (ex-food & energy) was +0.4% m/m (3.8% y/y) in February. The so-called “supercore” ga2024-02-29 · Bonds & RatesCompeting Forces in the Bond MarketProductivity is the Way Out Productivity plays a crucial role in influencing both inflation and economic growth. A key to stopping a second wave of inflation is likely pr2024-02-14 · Bonds & RatesCPI: Shelter Costs Remain Uncomfortably HighConsumer prices came in hotter than expected to start the year. This delivers another painful blow to market expectations for quick and aggressive Fed rate cuts. January 2024-02-01 · Bonds & RatesFed Reconfirms 2% Inflation TargetThe Fed left the benchmark rate unchanged at 5.25%-5.5%, as was expected. This is the fourth meeting in a row of no action. They did back away from their prior bias to fu2024-01-18 · Bonds & RatesInflation Volatility Unlikely to DisappearMarket is Pricing in Six Rates Cuts in 2024 Currently, Fed Funds traders are pricing in six cuts (shown below in orange) by the end of 2024. Keep in mind that the Fed pro2024-01-12 · Bonds & RatesDecember CPI: Shelter Prices Still the DriverThe U.S. Headline CPI for December rose +0.3% m/m (3.4% y/y) and the core CPI (ex: food & energy) was +0.3% m/m (3.9% y/y). Source: BLS/Stifel as of 01.11.2024 Inflat2024-01-04 · Bonds & RatesAssessing the Historic Bond RallyBiggest Two-Month Rally in 40 Years Optimistic inflation data, and a Fed in the driver’s seat, have investors pricing in ~6 rate cuts in 2024. Source: Bianco as of 12.31.2023-12-21 · Bonds & RatesWill the Dovish Pivot Stick?The shift in expectations for future interest rates has become the top narrative of markets. Following last week’s FOMC meeting, markets were thrilled to see the Fed add 2023-12-15 · Bonds & RatesDecember FOMC UpdateAs expected, the Fed left its target rate unchanged at 5.25% – 5.50%, matching market consensus. The updated rate forecast, or dot plot, doesn’t have another rate hike pe2023-12-07 · Bonds & RatesUpdate on Rate Cut ExpectationsFed expectations moved drastically last week. On Friday, November 24, markets were pricing in three cuts in 2024, with the first in June (orange). By Friday, December 1, 2023-11-22 · Bonds & RatesQT Still On But Conditions Have EasedLast week, the CPI & PPI print both came in weaker than expected. The market responded favorably with stocks up and yields dropping. The bigger change in our minds wa2023-11-09 · Bonds & RatesBond Bounce: Sustainable?Last week brought a substantial rally in bonds following a brutal three-month span of higher rates. There are a couple of reasons we can point to for the move lower in ra2023-11-02 · Bonds & RatesFOMC Pause, For NowAs broadly expected, the Fed left their target Fed Funds rate unchanged at the 5.25% to 5.50% range. The pause from July to November marks the longest period without an i2023-10-25 · Bonds & RatesHigh Bond Volatility Supports Higher YieldsProbable Fed Pause in November Fed Chair Powell’s commentary last week pointed to the relentless rise in longer-dated Treasury yields that was creating an environment of 2023-10-11 · Bonds & RatesAround the Bond Market, October 2023Inflation Still a Concern September PPI rose 0.5%, more than the 0.3% gain expected and following a 0.7% increase the month prior. Year-over-year, producer prices rose 2.2023-09-27 · Bonds & RatesMarkets Finally Believing Higher for LongerThe recent Fed meeting brought an update to the 2024 median for the Fed Funds rate. It was pushed higher with the top dot now 6.1%, up from 5.9% in June. If growth persis2023-09-21 · Bonds & RatesThe Complexities of InflationWe thought the current backdrop provided an opportunity to dive into the basics of inflation. The below analysis will attempt to isolate different types of inflation, and2023-09-13 · Bonds & RatesRate Hikes Working, No Cuts AheadHeadline CPI rose 0.6% in August from the prior month, a faster pace than in July as gasoline prices jumped. Core CPI rose 0.3% (stripping food and energy costs), a hotte2023-08-31 · Bonds & RatesAll Around the Bond Market, Aug 2023Jackson Hole Fed Chair Powell’s message last week at Jackson Hole was direct. The Fed won’t be taking victory laps over inflation just yet. Powell noted “we are navigatin2023-08-15 · Bonds & RatesMarket Still Undershooting Fed CommunicationGlobal central bankers will gather later this month in Jackson Hole, WY for their annual meeting. We anticipate markets will seek to understand Powell’s desire to push ba2023-08-11 · Bonds & RatesAugust 2023 CPI: Progress ContinuesThe July CPI came out to be another soft report and points to further moderation in inflation. Headline CPI increased by 0.2% MoM (0.167% unrounded), which resulted in th2023-08-02 · Bonds & RatesFitch Downgrades US Credit RatingWe’ve all seen the news that Fitch downgraded the US Government’s credit rating from AAA to AA+. Fitch’s move follows a similar cut by S&P about 12 years ago. Source:2023-08-01 · Bonds & RatesYields Rising, and a Curveball!Rise in Interest Income is Helping Buoy the Consumer The increase in interest rates over the last 15-18 months has made it is more expensive to borrow money but on the fl2023-07-26 · Bonds & RatesJuly 2023 FOMC: Another 25bpsThe Fed raised rates for the 11th time in 16 months, bumping rates +25bp to 5.25%-5.5% at today’s FOMC meeting. This matched the market consensus and puts short-term rate2023-07-19 · Bonds & RatesThe Fed is Still on AlertWith many declaring the Fed’s work done, we thought it made sense to discuss the challenges that still remain in this hiking cycle. The headline inflation numbers have be2023-07-05 · Bonds & RatesFed and Treasury on Collision CourseQT Slowly Eating Away Liquidity Even with the spike in the Fed’s Balance sheet following the SIVB (Silicon Valley Bank) collapse, QT is still quietly going on in the back2023-06-21 · Bonds & RatesCan Inflation Slow Without Economic Damage?Source: Strategas as of 06.20.2023 Many of the underlying sources of inflation have cooled over the past year. Supply chains have improved, interest rate sensitive sector2023-06-15 · Bonds & RatesJune FOMC Recap & ThoughtsThe “Hawkish” Pause Yesterday the Fed left their target for the funds rate unchanged between 5% to 5.25%. Many labeled the pause a hawkish “skip” where further tightening2023-06-14 · Bonds & RatesMay CPI: Easier Inflation Comps EndingYear-over-year CPI declined in May, roughly in line with estimates: Headline MoM: +0.1% (Expected: +0.1%) Core MoM: +0.4% (Expected +0.4%) Headline YoY: +4.0% (Expected: 2023-06-07 · Bonds & RatesPause Ahead… What About the Fall?The next Fed meeting starts a week from today. As of now, the market is currently pricing in just a 23% chance the Fed hikes at the meeting. WSJ’s Nick Timiraos already p2023-05-24 · Bonds & RatesWhat Rate Cuts?Not too long ago, markets were pricing potential for a rate cut at the July meeting. That has been pushed out to November as the “hold-and-see” narrative takes over from 2023-05-15 · Bonds & RatesT-Bills At Risk?We’ve written extensively about the debt ceiling, and how it could impact markets (see Part One and Part Deux). While uncertainty remains around the various market impact2023-05-11 · Bonds & RatesApril CPI is No Game ChangerInline CPI print with Shelter continuing to pull the index higher although some signs of slowing. Used Cars prices came in hotter than expected which have been lagging th2023-05-03 · Bonds & RatesMay 2023 FOMC: (Still) Higher for LongerThe Fed delivered a 25bps hike as was broadly expected by markets. They made a modification in their statement omitting the wording regarding the necessity of further rat2023-04-27 · Bonds & RatesThoughts on the Curve. And Municipals.Curves are Inverted, Term Premiums LOW The market continues to price in a return to the 2010 norms of subdued inflation pressure, with term premia below zero across the c2023-04-13 · Bonds & RatesMarch 2023 CPI UpdateCore CPI was in line with a softer shelter print (shelter/OER came in at 0.45%), but the headline was a little soft as energy declined, food was flat. The big question is2023-04-03 · Bonds & RatesTIPS Update, March 2023A Look Back on TIPS Treasury Inflation-Protected Securities (TIPS) are a type of government bond issued by the US Treasury Department. Unlike conventional bonds, TIPS are2023-03-21 · Bonds & RatesThe Current Opportunity Set in BondsMunicipal Spreads are Lacking Luster Spreads on short municipal paper (10yrs and in) are well inside their historic averages. Source: UBS. As of March 17th, 2023. Municip2023-03-14 · Bonds & RatesFebruary 2023 CPI UpdateConsumer prices rose in February by the most in 5 months, although the move was roughly in line with expectations. Headline CPI number moved lower to 6.0% YoY as the Febr2023-03-13 · Bonds & RatesBank Bailout2 Years a Movin’ To give some perspective on the move in Fed Funds rate the last couple days, we have just witnessed one of the fastest/ largest slides since 1987. Source2023-03-01 · Bonds & RatesFleeting Bond RallyWhile bonds got off to a fast start this year, February’s returns were almost the mirror image from a total return standpoint. As the chart shows, Bloomberg’s Global Aggr2023-02-16 · Bonds & RatesMarket Finally Getting the Point?The blue line below is what the Fed is communicating per their DOT plot, on the terminal rate going to a range of 5.00% to 5.25%. The orange line is yesterday’s Fed Funds2023-02-14 · Bonds & RatesHigher For LongerAnother Stubborn CPI Report Likely Pressures Fed to Maintain Hikes The BLS’s latest inflation figures published this morning showed consumer prices rose 6.4% Y/Y in Janua2023-02-02 · Bonds & RatesPost-FOMC, February 2023As expected, the Fed hiked 25bps to the 4.5%-4.75% range, the eighth hike in a year. The markets experienced a pretty large rally following the FOMC meeting & presser2023-01-18 · Bonds & RatesCPI Target MovedThe US government will change its CPI methodology beginning next month. Previously they had updated weights biennially using two years of expenditure data. So for last ye2023-01-13 · Bonds & RatesDecember CPI In-LineCPI was right on the screws with expectations at -0.1% on headline and +0.3% core. But the details do paint a picture of lingering pressures at the core. Core services ro2023-01-05 · Bonds & RatesNo Sign of a Pause YetReal Bad, Nominal Worse While the Fed might have been slow off the mark in fighting inflation in 2021, they marched double-time last year starting in March, taking the be2022-12-21 · Bonds & RatesCentral Bank Tightening, International VersionBank of Japan (BOJ) Finally Flinched BOJ made a decision to double the trading band of the 10-year Japanese government bond. We believe the move is justified. It may mark2022-12-13 · Bonds & RatesNovember CPI: Light at the End of the Tunnel?The CPI report came in softer than expected again in November. Core saw the smallest increase since Aug 2021. Core goods were down -0.5% (weakest since April 2020) and co2022-12-08 · Bonds & RatesPeak Funds Rate, For LongerFed chair Powell (and many other FOMC members) have made it clear that as of today, the Fed intends to: Slow down the pace of hikes Reach a higher peak rate than it thoug2022-12-01 · Bonds & RatesWas that the Powell Pivot 2.0?Powell’s comments and the market response yesterday were noteworthy. The equity market rose (SPX +3.05%) while bond yields rallied across the yield curve following Powell2022-11-22 · Bonds & RatesA Rant on the Yield Curve InversionWhere Does the Terminal Rate Need to Go? Source: Bloomberg. As of 11/18/22. It’s pretty clear the pace of rate hikes will slow down soon, although we believe we are far f2022-11-10 · Bonds & RatesA Good Day for The FedYear-over-year, CPI rose 7.7%, down from the 8.2% pace reported the month prior and the fourth consecutive month of cooling price pressures, albeit still near a four-deca2022-11-09 · Bonds & RatesWhat Could Stop the Fed?Newton’s First Law of Motion states that an object in motion tends to stay in motion unless an external force acts upon it. The Fed is in motion (hiking rates/QT) and unt

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