![]() While we would like confirmation from Powell, the rumblings from other Fed members may likely mean the Fed will not increase rates anymore this cycle, barring an unforeseen jump in economic activity and or a resurgence in inflation. This afternoon’s FOMC minutes from their prior meeting may paint a more dovish stance than the market assumed a few weeks ago. ![]() He said we don’t need to increase rates anymore. On Tuesday morning, Fed President Bostic took the more dovish stances noted above a step further. ![]() Based on Logan’s and Jefferson’s recent comments, they seem content that long-term interest rates may be doing their job for them. ![]() While unsustainable in the long run, such action would eventually slow the economy and weaken inflation. We believe Fed members’ insistence on repeating “higher for longer” is designed to keep long-term rates high. On her heels, Vice-Fed Chair Jefferson made similar comments, as we share below. Yesterday, we noted that Fed Dallas President Lorie Logan was explaining how the recent spurt in long-term interest rates was a factor that should further restrict economic growth and, therefore, inflation. Treasuries, such as we saw these past few days. More importantly, in times of war, financial stress, or other events, foreign reserves will seek the safety of U.S. Treasuries as “they don’t want our debt.” As shown, such is clearly not the case. There is also a false narrative about foreign Governments selling U.S. Arbitrage between futures, ETFs, and bonds is incredibly easy, meaning that any divergences, like those mentioned above, are only optical. Again, any differences will be made up the next trading day. cause the prices of ETFs to change while bonds remain fixed at their 2 p.m. Accordingly, changes in the bond futures market between 2 p.m. Such divergences happen daily, albeit they tend to be small. The two-day changes in futures, ETFs, and bonds are now similar. However, because the bond market was closed on Monday, Tuesday’s opening bond yields were sharply lower, reflecting yield changes on Monday and Tuesday. On Tuesday, futures and ETFs opened lower, giving up some of the gains. Bond ETFs followed futures higher on Monday. Bond futures rose sharply Monday as the Israeli war news provoked a flight to quality. bond market was closed Monday for Columbus Day, but the futures and equities markets were open. Given small businesses account for almost 50% of the workforce, we fear layoffs may increase to help offset weaker sales and declining or negative profits.Ī few of our readers asked us why bond ETF prices were down Wednesday morning despite bond yields falling sharply. Among owners reporting lower profits, 29% blamed weaker sales, 20% blamed the rise in the cost of materials, 15% cited labor costs, 8% cited lower prices, 7% cited the usual seasonal change, and 6% cited higher taxes or regulatory costs.” Losing money on weaker sales is a recipe for job layoffs and other budget cuts. Within the NFIB report, we found the following quote: “The frequency of reports of positive profit trends was a net negative 24%, up one point from August. The other big problem almost half of those surveyed by the NFIB face is finding qualified employees. 23% of small business owners deem inflation as their most important problem. Such is above the low registered in mid-2022 but below levels reached during the financial crisis. The forward-looking NFIB business outlook (orange) dropped to -43. The September NFIB Small Business Optimism Index (blue) fell to 90.8 from 91.3, remaining near the lowest levels since the financial crisis.
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