FinSer 

 Financial Focus

March 4, 2021 
 

    GOOD MORNING! If Fed Chairman Powell’s intent in his comments was to soothe the markets, it didn’t work. He roiled the markets as he reaffirmed the Fed believe the aggressive accommodative policy is appropriate and the central bank would be patient as it is still a long way from achieving its goal of maximum and inclusive employment. He also said that inflation pressures this year would be transitory. In sum, the Fed would be reactive, not proactive. This was not new news. He also said he took note of the spike in longer maturing yields a week ago, but didn’t think it rose to the serious level of being disorderly or a persistent tightening in financial conditions. With no hint of extending the duration of its Treasury purchases or another Operation Twist and light, if that, pushback at the bond market, Treasury yields found the least path of resistance was up and, in turn, turned stocks from being in the green into being in the red. Another factor in the market place was energy commodity prices spiking up as the OPEC-plus group decided to not raise production quotas.
     After being slightly lower overnight, US stock index futures have shown some resilience and inched into positive territory. The same for Treasury prices as the dollar has strengthened ahead of this morning’s February employment report. In spite of dollar strength, energy commodities have continued to move higher in price. While stocks and bonds appear to be marking time before the economic data release, Mr. Volatility is probably not through with the markets. There is a lot of market buzz of extreme positions in the various asset classes. The repurchase or repo market (short-term collateralized loans in order for the short side of a transaction can borrow and deliver the security) is trading at an extreme tied to giant short positions in the 10-yeary T-note and other long-term T-bonds. They hope they can use next week’s auctions of re-opened 10- and 30-year Treasuries to cover their short positions. What can go wrong? An off-the-mark employment report is what can go wrong. The range of forecasts for the change in US non-farm payrolls is over a half-million people with the average and median estimate just under 200k. This suggests the report can be a wild card. With a weekend ahead, some position holders may get very nervous. Stay masked up, stay buckled up and stay safe.        

 
TODAY             
PREVIOUS        
FED FUNDS
0.0% to 0.25% 0.0% to 0.25%
1 MONTH LIBOR
0.10300% 0.10838%
S & P 500
3768.47 3819.72
GOLD
1694.30 1714.10
YEN
108.45 107.34
EURO
1.1932 1.2036
WEST TEXAS CRUDE
63.83 61.28
T-BILLS
YIELD                
YIELD                 
3 MONTH
0.03 0.03
6 MONTH
0.05 0.05
1 YEAR
0.07 0.07
T-NOTES / BONDS
YIELD                 
YIELD                  
2 YEAR
0.14 0.14
3 YEAR
0.30 0.28
5 YEAR
0.78 0.72
10 YEAR
1.55 1.46
30 YEAR
2.30 2.23
                                                                                                 Data Source: Bloomberg Financial Markets