The recent rise in bond yields has finally caught the attention of Federal Reserve policymakers. Gov. Lael Brainard said Tuesday that “some of those moves last week and the speed of the moves caught my eye.” San Francisco Fed Chairman Mary Daly said the central bank could alter the maturity of its bond purchases, or even, as it has done before, sell short-term securities to buy bonds from longer-term government in the so-called “turn”.
Steven Blitz, chief U.S. economist and CEO of global macro service TS Lombard, says the Fed’s determination to keep interest rates low through quantitative easing is fueling another problem. The growth of loans from commercial banks is slowing down, at a time when the economy is accelerating.
Separating mortgages (which banks do not keep on their balance sheets), commercial bank loans grow by about 5% year-on-year, according to the latest Federal Reserve weekly data. This dropped to 10% in April.
The Fed’s position on Treasury debt to manage yields is not inflationary because it requires the central bank to have assets of commercial banks, Blitz says. Commercial banks don’t care, as the Fed pays them interest on what is essentially a risk-free transaction. The Fed now owns 16% of commercial bank assets, up from 6% in 2019.
“This exercise reminds us that the Fed cannot protect markets forever from the cost of financing Treasury debt that is growing faster than nominal GDP. At the moment, the economy is enjoying below-equilibrium interest rates, but high reserves and capital constraints mean that banks are not fully able to help others take advantage of growth through loans that these low rates would suggest, ”says Blitz.
Far from predicting a rise in inflation, Blitz says the basic measure of personal consumption spending will grow by only 1.3% in the fourth quarter and 1.7% next year. Blitz says the likely $ 1,400 stimulus controls and COVID-19 vaccines will boost the economy, but up to a relatively lukewarm 4.5% annualized rate in the fourth quarter, and slow to 2. 8% next year.
The buzz
Texas ends its mandate to disguise itself and removes all restrictions on businesses. Travel Provider Lyft LYFT,
rose 6% in premarket trading after saying it enjoyed the busiest week since March 2020 as it lowered its estimate of losses.
Rocket Cos. RKT,
will be in the spotlight, after the mortgage provider’s shares jumped 71% on Tuesday, to an extent compared to the small pressure that briefly lifted the shares of video game retailer GameStop GME
Rocket shares fell 7% in the first acts.
Server and storage provider Hewlett Packard Enterprise Co. HPE,
reported higher-than-expected revenue and earnings for the first quarter of late January.
The economic calendar includes the measurement of ADP’s private sector payrolls, the ISM services report, and the beige book of Fed economic anecdotes.
The market
After ending Tuesday, futures US stocks ES00,
NQ00,
signaled a stronger start, with the Dow Industrial YM00,
hire more than 200 points.
The performance of the TMUBMUSD10Y three years from the Treasury,
it was 1.44%. Bitcoin BTC.1,
futures topped $ 50,000, while GC00 gold,
futures fell.
The graph
Fund manager Columbia Threadneedle has developed an index of normalcy for the United States based on various measures, such as travel, in-store shopping, and eating out. It does not aim to monitor economic indicators such as gross domestic product, but focuses on measuring components of daily life. The most recent increase occurred when returning to face-to-face schooling.
Random readings
Singer-songwriter Dolly Parton turned her song “Jolene” into “Vaccine” when she received the first dose of Modern MRNA,
COVID-19 inoculation helped fund it.
Sepia, unlike some young children, can pass what is called the marshmallow test, designed to measure self-control.
Here’s a great value for you: a small porcelain bowl bought for $ 35 will be auctioned off at a Connecticut Garden sale. Sotheby’s broker says it can get up to $ 500,000.
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