We expect the Federal Reserve to cut its policy rate by 25 basis points at its meeting on Thursday to a range between 4.5% and 4.75%. We anticipate an uneventful meeting given its proximity to the presidential election and the flexibility that the Fed will need heading into its December meeting ... READ MORE >
yield curve
U.S. financial conditions update: A shift in structure and a new center of gravity
Monetary policy has reached a pivot point, bringing an increased probability for sustained growth and easing fears of a premature end to the business cycle. This improvement should underscore the positive outlook that will be featured in the Federal Open Market Committee’s Summary of Economic ... READ MORE >
Rates outlook: As economy enters glide path, bond market hedges its bets
There are growing signs that inflation is retreating while the labor market remains healthy. Absent another shock, the Federal Reserve is likely to ease up on its rate increases as these dynamics take hold. Even a pause in rate hikes would most likely guide the economy toward a mild downturn rather ... READ MORE >
Interest rate outlook: Debt ceiling standoff raised the cost of doing business
One cost of the debt ceiling crisis that is lost among most political actors and the public is that the U.S. Treasury will need to refill its coffers. That need to sell debt—$1.1 trillion of it—along with a strong probability of another Federal Reserve rate hike or two during the third ... READ MORE >
Rising uncertainty stimulating a flight to cash
Uncertainty over the business cycle, a more restrictive monetary policy and the impasse over raising the nation’s debt ceiling are spurring a classic migration to the preferred habitat of spooked investors: risk-free securities. With the U.S. two-year yield now exceeding 5% and the Federal ... READ MORE >
U.S. financial markets in the new year
Financial markets have started the year facing a host of challenges, including the prospect of a stand-off over the debt ceiling in a divided Congress and the possibility of a recession later this year. At the same time, businesses are contending with higher costs associated with the ... READ MORE >
Interest rate update: Confidence in the Fed, but uncertainty over long-term growth
The Federal Reserve has started to normalize interest rates, lifting the short-term transaction cost off the zero bound following two years of crisis policy. The result has been a 100-basis point increase in the yield on 10-year Treasury bonds, which have increased from just under 2% to nearly 3% in a ... READ MORE >
What is the yield curve telling us?
Fears of an imminent recession are somewhat overblown. These fears are showing up in fixed-income markets, where investors are betting that the risk of a recession is rising as the economy absorbs a supply shock in the commodity and energy markets and as central banks increase interest rates. But ... READ MORE >
As global tensions rise, RSM US Financial Conditions Index deteriorates
Our composite RSM US Financial Conditions Index is falling, reaching nearly one standard deviation below zero as the situation in Ukraine continues to threaten trade and global financial stability. The negative trends in the equity, money and bond markets imply a reassessment of the economic recovery, ... READ MORE >
Chart of the day: Pricing in the December debt cliff
The Treasury bill market is pricing in a shortage of notes in November as the threat of a debt ceiling crisis grows. Despite the recent legislative passage of a 10-year infrastructure investment plan, Congress and the Biden administration are no closer to an agreement on lifting the debt ceiling. We ... READ MORE >