Phantom Jobless Claims Mask the Labor Market Recovery
We’ve written ad nauseum in these pages about the distorted and misleading economic data that have been produced during the unprecedented economic volatility of...
April 14, 2021
Perspectives Topic:
Market and Economics
Tantrum Without the Taper: FAQ on Recent Market Volatility
The recent volatility in bond markets has prompted quite a few inquiries from clients. Here we consolidate our thoughts on the most frequently asked...
March 9, 2021
What a Difference An Hour Can Make
Earlier this year, a change occurred with respect to fixed income security pricing that many service providers in the industry (e.g., custodians, recordkeepers, etc.)...
March 1, 2021
A Conversation About The October Payrolls Report
Overheard on the NISA trading floor, Friday, November 6, 2020. Jess Yawitz: “Another strong payrolls report this morning, eh?” Stephen Douglass: “Yep, the jobs...
November 19, 2020
Making Up Is Hard To Do: The Fed Adopts An Average Inflation Target Part II
In a post earlier this week, we explained how the Fed’s new flexible average inflation targeting (AIT) framework is motivated by a desire to...
October 29, 2020
Making Up Is Hard To Do: The Fed Adopts An Average Inflation Target
In a landmark speech at the Jackson Hole conference in late August, Chairman Powell announced the first significant revision to the Fed’s operating framework...
October 27, 2020
Initial Jobless Claims Only Tell Half The Story, And It’s Not The Good Half
Regular readers will know we’ve been on somewhat of a campaign against economic disinformation this year, describing how data errors and faulty seasonal adjustments...
October 20, 2020
Service Required: The Unique Structural Impact of the 2020 Recession
The pandemic caused a recession unlike any other in American history. We’ve previously discussed the unprecedented speed of the shock itself and the policy...
October 8, 2020
Progress
As we have been saying, the seasonal adjustment process for initial jobless claims has been wholly inappropriate given the scale of job losses during...
August 28, 2020
Seasonally Maladjusted: How Statistical Methods Have Destroyed 3.7 Million Jobs Since March
In this short note we demonstrate, primarily using a few examples and data points, how totally inappropriate it is to seasonally adjust initial unemployment...
July 30, 2020
Labor Market Update: Objects in Mirror are Better than They Appear
The labor market continued its spectacular recovery in June. The jobs report released on Friday reflected a net gain of 4.8 million jobs, almost...
July 9, 2020
A 10 Million Job Surprise
The May jobs report produced the biggest surprise we have ever seen from an economic data release. Nonfarm payroll employment increased by 2.5 million...
June 15, 2020
The Fed’s Crisis Playbook: Speak Softly and Carry an Unlimited Balance Sheet
COVID-19 has delivered an economic shock of unprecedented speed and severity. The Federal Reserve under Chairman Powell has responded with the most aggressive policy...
May 20, 2020
A Recession Unlike Any Other
The longest expansion in U.S. economic history ended in February. March ushered in a recession that will be unlike any other we have seen...
April 24, 2020
Quick Post on Rebalancing
I know this is not the time for a long note on rebalancing theory and best practices. That said, current market conditions will make...
March 24, 2020
Treasury Yields: How Low Can They Go?
This has been a frequent question from clients in the past week as the spike in cross-asset volatility sent Treasury yields plunging to record...
March 12, 2020
State of the US Consumer in Four Charts
With no shortage of economic uncertainty in the world, it is natural to ask whether the US consumer can continue as the primary engine...
November 18, 2019
FAQ: What Happened in the Repo Market Last Month?
A volatile September in the normally placid money markets inspired a number of client inquiries, and a few overzealous headline writers in the financial...
October 9, 2019
Monetary Policy in the U.S. is Being Determined by European (Japanese) Financial Markets
As we approach the next Fed meeting in September, expect more chatter on 1) whether they should ease and 2) what the inverted Treasury...
September 4, 2019
Global Bond Yields Plunge to Record Lows
Bond yields have fallen dramatically around the world this month, driven by the latest escalation of the trade war as well as signals that...
August 21, 2019
The Waiting is the Hardest Part: An Update on the LIBOR Transition
The LIBOR transition continues. As we have outlined in previous notes, we are six years into a global effort to replace LIBOR with more...
July 10, 2019
Market Bids Farewell to the Fed’s Tightening Cycle
The last seven weeks have seen a dramatic repricing of the expected path of monetary policy. As recently as November 8, the fed funds...
January 3, 2019
SOFR, So Good
The LIBOR transition continues. A global effort has been underway since 2013 to reduce dependency on LIBOR, the benchmark interest rate discredited by a...
November 14, 2018
China, the Goliath of the Treasury Market
After the latest round of the trade war, China has imposed tariffs on nearly all of the $130 billion in annual goods imports from...
October 16, 2018
Fed’s Technical Adjustment to IOER is a Sign of Things to Come
It was a surprise to no one when the Federal Reserve hiked rates this past Wednesday. The purpose of this note is to describe...
June 19, 2018
Anticipating the FIFO Rule
As the effort to reform the U.S. tax code speeds through the legislative process, it is clear that, whatever the specifics of the ultimate...
December 11, 2017
The Phillips Curve is Dead, Long Live the Phillips Curve!
The Phillips Curve describes the relationship between unemployment and inflation. First proposed in 1958, the theory holds that a low unemployment rate reflects a...
December 5, 2017
Fed Takes First Step of $2 Trillion Journey
The Federal Reserve took the first step this week of what will be a long journey towards normalizing its balance sheet after buying nearly...
November 2, 2017
The Beginning of the End for LIBOR
The end is nigh for the London Interbank Offered Rate. The CEO of the British markets regulator, the Financial Conduct Authority, announced yesterday that...
July 28, 2017
Does the Size of a Company’s Pension Affect its Stock Price?
Summary We examined the statistics behind the claim that large pensions drag down a company’s valuation and accordingly how annuity buyouts allow a sponsor...
May 25, 2017
Go Long!
The Treasury Department is considering issuing an ultra-long bond with a maturity greater than 30 years. The idea was first raised in post-election interviews...
May 19, 2017
Taking A Hike
It is a well-known market truism that the Fed tries to avoid surprising markets with its monetary policy decisions, especially when those decisions result...
March 10, 2017
Make Funded Status Great Again (Again)
The ongoing equity rally and the rise in Treasury yields prompted us to revisit this analysis. Between yesterday’s close (December 1) and November 10,...
December 2, 2016
Make Funded Status Great Again
It has been an interesting week. Regardless of your political leanings, Tuesday’s election seems to have already produced another unlikely winner: defined benefit plan...
November 11, 2016
Grading Rates on a Curve
Can rates in the U.S. only go up from here? With Treasury yields reaching historical lows recently, it may be tempting to think of...
July 26, 2016
Have Cash – Will Carry: Another Simple Strategy to Help Enhance Cash Yields
As the (seemingly) never-ending search for yield continues in year eight of the “low for long era,” an oldie but a goodie comes to...
June 29, 2016
Bonds Without Borders
It may pay to be a little more cosmopolitan when it comes to your bond portfolio. Yield differences between comparable maturity instruments in different...
May 11, 2016
Prix Fixe vs. A la Carte (or, Asset Classes vs. Risk Premia)?
When you go to a restaurant for a nice meal, do you prefer to order from the prix fixe menu or go the à...
April 22, 2016
Long Corporates and Low Treasuries
We talk with a lot of pension plan sponsors who strategically want to hedge their liabilities by buying long duration corporate bonds but who...
April 5, 2016
Risk Premia Strategies – Beta Overlay 2.0?
The advent of investable risk premia indices brings beta overlay to a new level. These tools allow investors to adjust the pre-packaged factor weights...
March 29, 2016
Rebalancing? Don’t Forget Derivatives
January’s steep drop in equity prices and rise in bond prices mean that many institutional investors are thinking about the same thing: rebalancing. With...
February 8, 2016
Here’s an Idea to Potentially Enhance Your Cash Returns
Returns will be hard to come by in 2016. That is perhaps the least controversial prediction we can offer for the New Year. Though...
January 11, 2016
Brazil Downgraded to Junk—But It’s Not High Yield!
Brazil’s sovereign debt was recently downgraded below investment grade (IG). Before the downgrade, its index-eligible bonds were included in both the Barclays US Credit...
December 22, 2015
Fed Liftoff: More Questions than Answers
Markets are currently implying nearly an 80% probability that on December 16th the fed funds target range will be raised by 25 basis points....
December 10, 2015
Our Take on Negative Swap Spreads
While the topic may not have come up at the Thanksgiving table, it’s one of the most discussed issues in the markets right now:...
December 3, 2015