There’s a tug of war brewing between housing costs and consumer budgets in the US. Single-family home prices have risen 6% a year or more since 2011, and supply/demand forces point to further increases. But consumer budgets have limits. Some buyers are now spending around half of their income on housing.
Momentum in the US economy relative to the rest of the world should keep the Fed on its current path to higher short-term interest rates.
While the recent backup in 10-year Treasury yields may look stark on short-term charts (namely 1-year and 2-year charts), the move we’ve seen in rates thus far is actually very normal considering where we are in the economic cycle.
Christopher Romanelli examines the factors that could support the high yield market in a world of tighter monetary policy.
Is a regime shift in monetary policy imminent? One might think so looking at the yield curve flattening trend—the 5-year and 30-year Treasury yield spread has narrowed 75 basis points (bps) since September 2017 and appears to be on track to flatten entirely.
It may be chilly outside this spring, but the US economy is currently running hot. Two data releases this week indicate that the economy is hot. However, I caution that these days, hot is not what it used to be.
Don't let increased volatility throw you off track. We believe key drivers of growth around the world remain in place. Although the pace of global acceleration has slowed a bit recently, economic indicators continue to signal levels of activity consistent with expansion.
Subprime. It’s the eight-letter word that turned into something of a four-letter word during the 2008 global financial crisis. Even now, ten years later, that stink has not washed off. Investors have been eyeing subprime auto asset-backed securities (ABS) for signs of trouble, wondering if growing auto debt levels, rising interest rates, deteriorating performance and changing issuer composition could mean the next subprime storm is brewing.
The LOIS spread is at its widest point since the financial crisis. It may be unnerving, but we don't think it's a sign of trouble in the financial system.
We all knew volatility couldn’t stay low forever, even with solid global growth and low inflation. Rising volatility is common in the late stage of the economic cycle, and negative headlines have been dominating market sentiment.