The U.S. Dollar Index has been marching higher in the wake of yesterday’s better-than-expected trade-deficit news. This index of the greenback in fact reached its highest mark since last November. Has the turnaround in the trade deficit that so many have hoped for finally arrived? If so, should investors celebrate or reserve judgment about the implications?
KEEPING THE FAITH
For the last three decades of the 20th century, oil and bond yields shared a stable, if hostile relationship. When the price of crude went up, so too did government bond yields. When oil prices fell, Treasury yields declined as well.
WE’RE FROM THE GOVERNMENT AND WE’RE HERE TO HELP YOU…REVALUE YOUR CURRENCY
Some in the United States believe that letting the Chinese yuan find its true value in the foreign exchange market will deliver a quick boon to America’s economy. Perhaps. But there’s reason for doubt.
SEEING IS BELIEVING
The bond market’s been reluctant to see the world through Fed-colored glasses of late, which is to say glasses that see monetary tightening as salvation from encroaching inflation. But after today’s jobs report for April, the fixed-income set is starting to focus on the world as seen by the central bank.
RETHINKING THE 10,950-DAY MATURITY FOR TREASURIES
Last month, the U.S. Treasury announced that Savings Bonds would no longer pay a variable rate. Now we hear that the defunct 30-year Treasury Bond (which was scratched several years ago when the everyone thought the government would run a budget surplus) may be making a timely (or should we say untimely?) return.
THREE PERCENT AND COUNTING
The Federal Reserve raised interest rates again today. The Fed funds rate inched higher by 25 basis points to 3.0%, only just below inflation’s pace, measured by the consumer price index, which advanced by 3.1% for the year through March. Twelve months previous, CPI was rising by 1.7% and the Fed funds rate was 1.0%. In short, the real (inflation-adjusted) Fed funds rate is close to being neutral, as opposed to negative, for the first time since 2002.
TOUGH GUYS, TOUGH TALK & TOUGH CHOICES
Robert Portman, the newly minted U.S. trade representative, promises to get tough with China. Red ink is the reason.
“Part of [the U.S. trade] deficit is because the Chinese do not always play by the rules,” he told the Senate Finance Committee via Bloomberg News a week before he received confirmation for ascension to the trade post from his former life as a Republican congressman from Ohio.
JUNK SALE
If the high-yield bond market is the fixed-income equivalent of the fat lady singing, the diva appears to be yodeling. Just what she’s saying, and what it means for the markets is debatable, but there’s no doubt that there’s a whole lot of singing going on.
THE SCIENCE WAS A BIT MORE DISMAL TODAY
The economy expanded at its slowest pace in two years in the first quarter, the government reported today, handing pessimists one more piece of ammunition for claiming that a slowdown is upon us.
DURABILITY TEST
One freshly published number in the dismal science can mean a lot these days when it comes moving investor sentiment. The case du jour comes to us from The U.S. Census Bureau, which reported this morning that durable goods orders posted an unexpected March decline—and a sharp decline at that.