Macro Monitor
2007 Outlook: CPI Tame First Half With Moderate Economic Growth
We believe interest rates are headed higher in 2007. Economy picked up some in Q4. Bond market sentiment still looks too optimistic.
Expectations For Bonds Still Too High
Despite the December correction, our 10-week Hines ratio (a modified put/call ratio) continues to show rampant speculation in T-bond futures call options, suggesting speculators are still betting on declining yields.
2007 Outlook: CPI Tame First Half And Economy Chugging Ahead Slowly
Expect economic recovery to pick up a little steam in early 2007, before slowing down in the second half. A 2008 recession is a possibility.
2007 Outlook: CPI Stabilizing First Half And Economy Chugging Ahead Slowly
Bond yields continue to fall as economic reports have tended to be on the weak side. Massive global liquidity and the search for yield have also helped to push yields lower. We have been way off the mark with our predictions for higher rates.
Bond Market Correction Did Not Happen In October
Our call for a bond market correction did not pan out in October, but yields did back up in early November as weak productivity and a surprisingly low unemployment rate were released.
Bond Market Remains Overextended...Correction Ahead?
Bond market remains ahead of itself and is vulnerable to correction.
Bond Market Overextended...Correction Ahead?
Bond market seems to be anticipating three key developments: Fed’s stance could switch from tightening to easing, the economy is slowing significantly, and inflation is licked.
Economic Outlook
Continue to project higher interest rates over the next six months, particularly longer maturities. Short rates could begin to decline by early-mid 2007, after Fed finishes tightening and economy slows.
Economic Outlook
It may be difficult for the economy to prolong its expansion, with the auto and housing sectors weakening, and consumer spending a big question mark.
Economic Outlook
Continue to project higher interest rates over the next six months, particularly longer maturities. Further Fed action will be more “data driven”.
Economic Outlook
Continue to project higher interest rates over the next six months, particularly longer maturities. After rate hike in May, Fed’s actions will be more “data driven”.
Economic Outlook
Based on our 6-12 month yield targets, short end of the yield curve looking more attractive.
Economic Outlook
It may be difficult for the economy to prolong its expansion, with the auto and housing sectors weakening and consumer spending a big question mark.
Economic Outlook
It may be difficult for the economy to prolong its expansion, with the auto and housing sectors weakening and consumer spending being a big question mark.
Economic Outlook
The current economic expansion is considered late stage.
Today's Yield Curve Inversion May Not Be Particularly Meaningful
Many economic recessions are preceded by inverted yield curves, but not all. There have been several inversions that have not immediately preceded a recession.
Economic Outlook
Still view long rates as potentially vulnerable to strong economy and unexpected inflation.
Economic Outlook
Still bearish on the bond market based on rising inflation and further Fed tightening.
Economic Outlook
Still bearish on the bond market. Boosting bond market target yields based on rising inflation and further Fed tightening.
Economic Outlook
Still bearish on the bond market. CPI inflation could continue to surprise on the upside; the economy never did hit a soft patch; and Fed may still make several more rate hikes.
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