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Daily Commentary

Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.

Wednesday, November 29, 2023 at 8:00 am CT
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Alloya Investment Services

Market Indications

Historic Treasury Curves 112723

Other Market Indicators

Market Indicators
2s/5s Tsy Spread-0.45+0.01
2s/10s Tsy Spread-0.40+0.01
2s/30s Tsy Spread -0.220.00
DJIA-30 35,416.98+83.51
S&P-500 4,554.89+4.46
Dollar Idx 102.08+0.08
CRB Idx 273.67+3.19

Daily Commentary

Recap - Equities were a “nothing burger” yesterday with the major indices closing near flat levels on the session. The  real star performer was the Treasury market, defying expectations yet again despite booming supply. The 4.32% closing level on the 10-year Treasury note was the lowest since September 18, and we have now retraced all of the sharp yield backup that occurred after the Fed meeting that month that advertised “higher for longer” and stamped that call with a premature addition of one more hike to the “dot plots.” The “higher for longer” narrative was even more transitory than “transitory” was!

Overnight bond markets continue to rock and roll with the 10-year Treasury yield falling to 4.28%. The beaten-down and detested bond market, left for dead, is now turning in its best month in more than four years… try August, the very month that Federal Reserve Chair Jerome Powell pivoted! The move is based on sharply declining inflation and a bond market that can see the whites of the eyes of the economy. The next stop is 4% (the 200-day moving average). On the front end, twos and fives are yielding 4.66% and 4.22%, respectively.

In other news, now, pay later takes the shine off the alleged bullish spending data. See the following article in Reuters “More U.S. shoppers tack on buy now, pay later debt for Cyber Monday”. For all the talk about Black Friday/Cyber Monday spending this year, the amount from Buy Now, Pay Later programs rose 19% year-over-year, confirming my suspicion that the largest users are those in precarious financial situations who have maxed out on their card cards. Takes just a little bit of the shine off the spending data.

Quote of The Day:

“I think there’s a real risk of a hard landing if the Fed doesn’t start cutting rates pretty soon.”- Bill Ackman, November 28th

Wait it gets even better. Look at what this long-standing Fed hawk had to say yesterday:

“If you see this lower inflation continuing for several more months, I don't know how long that might be—3 months? 4 months? 5 months?—you could then start lowering the policy rate because inflation's lower.”

 He added this tape bomb too:

 “I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%”.

Someone should inform him the inflation rate is already 1.5% once the bizarre shelter component is stripped out of the data — about 70% of the Consumer Price Index (CPI) is already running a half-point below target!.

We also had a wave of other Fed officials including Fed Presidents Austan Goolsbee (Chicago), John Williams (New York) and Fed Governor Michelle Bowman echoing very similar sentiments.

Economic Calendar

November 27 - December 1, 2023: The Week Ahead

Economic Calendar 112723

Future Fed Expectations

Source: Bloomberg

Chart - Future Fed Expectations Chart 112723

Expected Fed Funds Path 112023

Select Probabilities based on the Futures
Probability of Fed Funds rate HIKE on December 13, 20230%
Probability of Fed Funds rate HIKE on January 31, 20242%

**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.

The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Alloya Investment Services to discuss your specific situation and objectives.