Municipal Market Update – August 19, 2024
Job Reports Fuel Market Volatility
The unemployment rate rose to 4.3% in July, the highest level since October 2021. With inflation approaching long-term expectations, indication of a weaker labor market has recession talks creeping back into the market. Continue reading…
Municipal Market Update – July 12, 2024
June CPI Report Bolsters the Municipal Bond Market
Inflation fell in June for the first time since 2020, adding pressure on the Federal Reserve to start lowering interest rates later this year. The seasonally adjusted CPI report for last month showed that consumer prices decreased by 0.1% from May versus the 0.1% increase the markets had expected. Continue reading…
Municipal Market Update – June 14, 2024
May CPI Report Continues to Show Easing Inflation
The U.S. economy received another reprieve from sticky inflation readings when the latest CPI report released this week came in a little cooler than expected. This report has helped continue a trend of municipal bond rates declining from their 2024 highs seen at the end of May. Continue reading…
Municipal Market Update – May 17, 2024
Latest CPI Report Shows Easing Inflation
The US economy received a slight reprieve from recent hot inflation readings when the latest one released this week came in a little cooler than expected. The seasonally adjusted CPI report for the month of April showed that consumer prices increased by 0.3% from the prior month, slightly lower than the 0.4% reading the markets had expected. Continue reading…
Municipal Market Update – April 11, 2024
First Fed Rate Cut Pushed Back Again
The latest inflation report eclipsed consensus expectations for the third month in a row and markets responded accordingly. Bond yields increased, stock prices decreased, and interest rate traders now have only an approximately 50/50 probability of a 0.25% rate cut at the July Federal Reserve meeting. Continue reading…
Municipal Market Update – March 14, 2024
Markets Estimate First Fed Cut in June
Market expectations for the number of Federal Reserve rate cuts in 2024 continue to move lower and are now essentially aligned with the estimates provided by the Federal Reserve on December 12, 2023. Current probabilities indicate three, perhaps four, 0.25% cuts are likely in 2024, with the first cut occurring at the Fed’s June meeting. Continue reading…
Municipal Market Update – February 14, 2024
Economic Data Reduces Rate Cut Expectations
The latest round of jobs and inflation data came in hotter than consensus estimates, and markets have reacted accordingly by increasing bond yields and revising projections for when the Federal Reserve will have its first rate cut in 2024. Continue reading…
Municipal Market Update – January 12, 2024
Looking Back at 2023 and Ahead to 2024
In January 2023, the conventional wisdom of many market prognos-ticators was that the Federal Reserve would continue to raise its overnight rate in 2023, which would help reduce inflation, soften demand for labor, and likely tip the US economy into a mild recession. Continue reading…
Municipal Market Update – December 15, 2023
Markets Get Ahead of the Fed
With inflation and wage growth continuing to trend lower, markets have been bidding up bond prices (prices up, yields lower) in anticipation of next year’s rate cuts. That stated, some have argued that the bond market has overestimated how quickly the Fed will cut rates. Continue reading…
Municipal Market Update – November 16, 2023
Markets Rally on Inflation Data
The march towards the Federal Reserve’s 2.0% inflation target will likely be uneven from here on in, but this week’s inflation data provided another month of steady progress, which reinforced the markets’ view that the Fed’s rate hiking cycle is indeed over. If so, the next step for the Fed might be to keep its messaging sufficiently hawkish so markets don’t get ahead of themselves by baking in rate cuts faster than what Fed officials believe will be necessary to tame inflation. Continue reading…
Municipal Market Update – October 16, 2023
Is the Fed’s Rate Hiking Cycle Over?
Market participants that believe the Federal Reserve has reached the end of its rate increase cycle are pointing to three main factors. Despite unexpectedly strong hiring last month, wage growth continues to moderate. Core inflation data, measurements that exclude volatile food and energy prices, shows slower increases. Long-term US Treasury rates (e.g., 10-year and 30-year maturities) have increased materially since the start of September, which is its own form of financial tightening. Continue reading…
Municipal Market Update – September 15, 2023
Focus on the Core
Broadly speaking, consumer prices were notably higher in August than the previous month, but this was expected due to known increases in crude oil and gasoline prices. While progress on inflation is mixed it does continue on core inflation measures while the labor market continues to slowly cool. This gives the Federal Reserve (the Fed) the green light to keep the rates unchanged on September 20, but leaves the door open for one potential rate hike later in 2023. Continue reading…
Municipal Market Update – August 11, 2023
Feels Like Mile 20
A marathon is 26.2 miles, but runners have an old saying that a marathon begins at mile 20, meaning this is where the hard part starts. Some might say the Federal Reserve (the Fed) is at mile 20 on its inflation taming mission. Core inflation, measurements that exclude volatile food and energy prices, are slowly improving but are still in near 4.5% on an annual basis. Continue reading…
Municipal Market Update – July 14, 2023
Inflation Progress Inches Along
The latest round of core inflation data, measurements that exclude volatile food and energy prices, continues its slow and steady march lower. However, with core inflation still substantially higher than the Federal Reserve’s (the Fed), 2.0% target, and a labor market that continues to exhibit low unemployment and meaningful wage growth, there is still much work to do. Continue reading…
Municipal Market Update – June 16, 2023
A Fed Pause or a Skip?
As expected, for the first time in 15 months the Federal Reserve (the Fed) did not change its overnight rate at a regularly scheduled Federal Open Market Committee (FOMC) meeting. Less expected was that the latest Summary of Economic Projections had a majority of FOMC participants indicating that appropriate monetary policy would include two more rate increases this year. While most market participants were hoping for a Fed pause, meaning that the Fed is done raising rates for this cycle, the Fed is projecting that June’s meeting was a skip, meaning the Fed will need to raise rates yet again in 2023 to fight sticky inflation. Continue reading…
Municipal Market Update – May 12, 2023
Fed Looks Ready to Pause
As expected, the Federal Reserve (the Fed) increased its overnight rate by 0.25% on May 3, bringing the federal funds rate range to 5.00%-5.25%, and there were notable changes to the Federal Open Market Committee (FOMC) statement. Removed was language indicating the FOMC anticipates some additional tightening would be appropriate and added was language regarding the need to closely monitor incoming information and assess the implications for monetary policy. The Fed has telegraphed the previous 10 consecutive rate increases and barring some unexpected economic data between now and the second week in June, the Fed looks ready to pause. Continue reading…
Municipal Market Update – April 14, 2023
Economic Data Points to Another Fed Increase in May
Recent economic data indicates a still strong albeit cooling labor market, and inflation that continues to move lower, but remains at elevated levels. This data coupled with the stabilizing of the U.S. banking sector clears the way for the Federal Reserve (the Fed) to increase the overnight rate by 0.25% at its next meeting, which will conclude on May 3. Continue reading…
Municipal Market Update – March 16, 2023
Will Bank Failures Impact the Fed’s Rate Path?
At the start of last week financial markets were reasonably stable. There would be a jobs report on Friday, and then this week there would be consumer and producer inflation figures. Plenty of fresh economic data that would help inform the Federal Reserve’s next rate decision which is scheduled to be released on the afternoon of March 22, 2023. Continue reading…
Municipal Market Update – February 17, 2023
Hopes of a Meaningful Fed Pivot This Year Diminish
Over the past six months or so, there has been steady declines in both new jobs and aggregate measures of consumer inflation, leading some market participants to believe that the Federal Reserve (the Fed) will only need one or two 0.25% rate increases this year before it pivots towards rate reductions some time prior to the end of 2023. Continue reading…
Municipal Market Update – January 13, 2023
Looking Back at 2022 and Ahead to 2023
What a difference a year makes. In January 2022, the Federal Reserve (the Fed) kept its overnight rate at a range of zero to 0.25%, and was still committed to adding $30 billion to its balance sheet in February with the goal of ending its quantitative easing program in early March. Continue reading…
Municipal Market Update – December 15, 2022
Bond Market Data Indicates Confidence in Fed’s Resolve
Over the past week there have been two generally positive inflation reports, and the Federal Reserve (the Fed) increased its overnight rate as expected and reiterated its commitment to keeping rates higher for a longer period of time in order to bring inflation down to a more reasonable level. Continue reading…
Municipal Market Update – November 10, 2022
October Consumer Prices Ease Slightly
Today the Bureau of Labor Statistics released the consumer-price index (CPI) for October. The data provided some evidence that inflation is softening, but one month’s inflation report doesn’t necessarily make a trend. Continue reading…
Municipal Market Update – October 14, 2022
Core Inflation Exceeds Consensus Estimates
Economic data released over the past week indicate continued widespread inflationary pressures throughout the U.S. economy, although the impact of monetary tightening is becoming evident in some corners. Continue reading…
Municipal Market Update – September 14, 2022
Federal Reserve Expected to Stay Aggressive
Despite lower prices at the pump last month, the Labor Department’s consumer-price index (CPI) for August showed little improvement, which is expected to force the Federal Reserve to maintain its aggressive monetary policies for longer than most market participants were anticipating. Continue reading…
Municipal Market Update – August 12, 2022
Inflation, Inflation, Less Inflation
The Good News
The most recent inflation data was released on Wednesday, August 10th. The good news from this data is that headline inflation as measured by the Consumer Price Index (CPI) came in slightly lower than expected at a year-over-year rate of 8.5%. This suggests that inflation has slowed and, for the first time in months, a new 40-year high was not established. Continue reading…
Municipal Market Update – July 15, 2022
Accelerating Inflation Pressures Federal Reserve
Economic data released over the past week indicates continued inflationary pressures throughout the U.S. economy. The Labor Department reported on Tuesday, July 13, that the consumer-price index (CPI) increased by 9.1% for the 12 months ended in June, which exceeded May’s reading of 8.6%. While price increases were broad-based, gasoline, shelter, and food were the largest contributors, with the energy index contributing about half of June’s overall increase. Continue reading…
Municipal Market Update – June 17, 2022
The Fed Reacts to Higher-Than-Expected Inflation
Two weeks ago, there was broad acceptance by the market that the Federal Reserve would increase its overnight rate by 0.50% at its June 14-15 Federal Open Market Committee (FOMC) meeting. Those perceptions began to shift after the Labor Department reported on Friday, June 10th that May’s consumer price index (CPI) increased from May 2021 by 8.6%, which marked a new 40-year high. Continue reading…
Municipal Market Update – May 13, 2022
The Fed Tightens – Inflation Persists
The Federal Reserve’s (the Fed) Federal Open Market Committee (FOMC) met on May 3-4, 2022. As was widely expected by the market, the Fed increased its overnight rate by 0.50%, bringing the range to 0.75%-1.00%, and provided guidance on how the Fed would begin to reduce the size of its nearly $9.0 trillion balance sheet. Continue reading…
Municipal Market Update – April 19, 2022
More Inflation Leads to Higher Yields
March inflation data was released last week, and the results continued inflation’s recent trend as CPI reached a new 40-year high of 8.5%. Interestingly, however, once the latest CPI data was released, the 10-Year US Treasury fell by 0.08%, or 8 basis points (bps), from the prior day, moving in the opposite direction than most would have expected. Continue reading…
Municipal Market Update – March 14, 2022
Conflict in Ukraine Increases Fed’s Challenges
The Ukraine-Russia conflict is top of mind for many investors. Market volatility has risen substantially across U.S. fixed income and equity markets. This conflict will exacerbate the Federal Reserve’s (the Fed) most pressing challenge (i.e., controlling inflation), while likely limiting the magnitude of its ability to act due to a softening global economy. Continue reading…
Municipal Market Update – February 14, 2022
Inflation Drives Upward Trend in Rates
Over the last few weeks municipal bond rates have continued their trend upward that has so far defined the market in 2022. The rise in rates across bond markets was fueled again by the report out from the US Bureau of Labor Statistics on February 10 showing a 7.5% year-over-year increase to the Consumer Price Index. This eclipses the 7% CPI number that came a month earlier marking the highest inflation since 1981. Continue reading…
Municipal Market Update – January 14, 2022
The Fed Responds to Inflation
Inflation continues to be the hot topic of 2022 as we start the new year. The final CPI data for 2021 was released earlier this week and showed a year-over-year CPI rate of 7%. This is the highest annual CPI rate since 1981 when it hit 8.9%. In December, the Federal Reserve (the Fed) concluded that inflation measures were higher than originally thought. In response, the Fed is now tasked with using its available toolkit to slow down inflation. Continue reading…
Municipal Market Update – December 16, 2021
Municipal Bond Rates Remain Low Despite Fed Policy Action
The Federal Open Markets Committee (FOMC) met this week and Chairman Jerome Powell released a statement summarizing its meeting on Wednesday, December 15th. While the statement did not contain any elements of surprise, the direction in which the Federal Reserve (the Fed) is moving is substantial and noteworthy. First, Chairman Powell failed to include the term “transitory” in his remarks for the first time in recent memory when referring to the FOMC’s inflationary expectations. Continue reading…
Municipal Market Update – November 19, 2021
Low Rates Remain Amidst Swirl of Inflation Speculation
Despite constant news reports and speculation around inflationary pressures in the current economic landscape, municipal bond rates showed a steady trend over the last two weeks. A report released by the US Department of Labor on November 10 showed a 6.2% increase in the consumer price index over a one-year period ending in October 2021. This represents the highest level of inflation in more than 30 years according to that metric. Continue reading…
Municipal Market Update – November 5, 2021
The Tapering Begins
On November 2-3, 2021 the Federal Reserve’s (the Fed) Federal Open Market Committee (FOMC) held one of its eight regularly scheduled meetings for the year. At the post-meeting press conference Chairman Jerome Powell indicated that short-term rates would be kept near zero (0.00 – 0.25%), but that the Federal Reserve would reduce the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities later this month. Continue reading…
Municipal Market Update – October 1, 2021
Interest Rates On the Rise
As we enter the final quarter of the year, inflation is still headlining the news as economists and financial experts determine in which direction our economy is headed. Fed Chairman, Jerome Powell delivered a speech to the Senate Banking Committee on Tuesday, September 28, indicating that inflation concerns might last longer than he originally expected, but that he still expects inflation to come back down to the Federal Reserve’s long-term target of 2%. Continue reading…
