After reviewing macro and markets for the week, Jeff Mayberry and Samuel Lau turn to MMM’s Question of the Week and delve into the workings of U.S. Treasury securities auctions (17:28). These connect the U.S. government with buyers of Uncle Sam’s bonds, notes and TIPS. The co-hosts explain how individuals as well as institutions participate in these auctions, how ultimate security prices and yields are set and how to measure an auction’s “success” or “failure.”
Data prints on both the Federal Housing Finance Agency and Case-Shiller house price indices showed U.S. house price appreciation remained hot (7:16), signifying, as Sam Lau notes, “pain for buyers and bliss for sellers.” With demand for manufactured product outstripping supply, Jeff Mayberry sees in the latest ISM readings signs of continued strength in the manufacturing sector (8:44). A big miss in nonfarm payrolls (11:43) has the co-hosts discussing whether the Federal Reserve will push back taper talk to later in the year.

Monday Morning Minutes

MMM Episode 31: : Aug. 30-Sep. 3 Market Recap, Treasury Auctions Explained

After reviewing a red week for stocks, gold (almost -2%) and Bitcoin (almost -9%) and a flat week for bonds and commodities, Jeff Mayberry and Samuel Lau size up the impact on housing evictions and rents, as well as the possibility of durable follow-throughs into inflation gauges, after the U.S. Supreme Court’s overturning of the Biden administration’s eviction moratorium (11:05). With an estimated 750,000 households facing possible eviction and 3½ million households behind on their rent, the ruling stands to have significant economic and social repercussions, but those will take time to emerge. 
Given listener interest in the in’s and out’s of U.S. Treasury auctions, Jeff and Same discuss the tone the Sept. 9 Long Bond auction (3:18). The auction brought $24 billion of Uncle Sam’s 30-year IOUs to market; the Long Bond “traded through”: nearly 2 basis points below its pre-auction level. That’s “a sign,” Jeff notes, “that demand exceeded dealers’ expectations.” The co-hosts consider Treasury Secretary Janet Yellen’s alarm bells to Congress over the national debt ceiling deadline, and … they roll their eyes (27:21).

MMM Episode 32: Sep. 7-10 Macro/Market Recap, Eviction Elucidation & Janet’s Alarm Bells

After reviewing market and macro news for the week of Sept. 13-17, co-hosts Jeff Mayberry and Samuel Lau take up the Question of Week to explain the phenomenon of stagflation, the dilemma of high inflation amid a weak economy that last confronted the U.S. in the late 1970s-early 1980s (11:20). Jeff and Sam also share their reasons why they expect inflation to run above 5% for the foreseeable future (19:02). Sam expresses his doubts (22:20) about whether Federal Reserve Chair Jerome Powell will live up to his assurances about the central bank’s wherewithal to tamp down inflation in the event of a problematic deterioration in consumer purchasing power. On a related note, the podcast hosts will be watching the Federal Open Market Committee meeting and Powell’s related news conference, Wednesday Sept. 22, for any hint of taper talk (25:53).

MMM Episode 33: Sept. 13-17 Market Recap, Stagflation Answers, Powell Questions

DoubleLine’s Jeff Mayberry and Samuel Lau run down market and macro events for the Sept. 20-24 week, which ushered in the autumnal equinox and a new regular feature to the podcast, a deep dive into the week’s Federal Open Market Committee (FOMC) meeting. The S&P 500 was up for the week, led by the energy sector, which reclaimed the crown of sector of the year with its nearly 40% rise in 2021 (2:07). Bitcoin got some bad news from the crypto crackdown in China, which also caused waves with the Evergrande development crisis (4:47). On the macro front, PMI manufacturing and service numbers were strong, while Fed Chair Jerome H. Powell’s Friday listening event didn’t produce any headlines (7:35). Jeff and Sam launch the inaugural edition of their FOMC meeting deep dives, which will continue as long as the Fed keeps its heavy hand in the market (12:55). Big takeaways from the meeting include dot plot movement and a taper date set for November, as the Fed said its inflation and employment numbers have been met. Jeff and Sam note, however, that Powell stated the Fed will also look at the “broader environment” before tapering, and events such as Washington’s looming vote on the debt ceiling could affect the timeline. Looking ahead, next week’s deliveries will include data on durable good and housing price appreciation, and the personal consumption expenditures deflator (29:58).

MMM Episode 34: Sept. 20-24 Market/Macro Recap, FOMC Meeting Deep Dive and Outlook

Jeff Mayberry and Samuel Lau start off this MMM episode with a review of asset class performances for the month of September, including a 4.6% drop in the S&P 500. After guidance from Federal Reserve officials on tapering quantitative easing, the podcast hosts take note of mixed signals from the U.S. Treasury yield curve (3:19). For example, they observe that the long bond sustained its breakout above the 2% level while the 10-year yield settled below 1.50% after exceeding that level earlier in the week. For the Question of the Week (17:09), Jeff and Sam chew through a raft of research papers written convoluted Fed speak in their effort to put into plain English the Fed’s calculation and use of R-star. So how warmly will Fed policymakers follow through on their taper rhetoric? For part of the answer, Jeff and Sam look to the Oct. 8 release of the next nonfarm payrolls data and how close hiring comes to matching an expected increase of 500,000 for September (37:35).

MMM Episode 35: Sep. 27-Oct. 1 Market Recap, Taper Talk and the Fed’s Stars to Steer By

After wrapping up the market and macro news of Oct. 4-10, Jeff Mayberry and Samuel Lau explain Triple Witching Hour and its cousins: the Double Witching Hour and the erstwhile Quadruple Witching Hour (13:02). The week of Oct. 4-8 brought with it temporary action to fund the federal government, averting the possibility, however remote, of a default by the U.S. Treasury on its obligations. The podcast hosts, speaking intraday before the close, discuss a breakout above 1.50% for the 10-year Treasury yield (2:18), although Jeff points out that the 10-year bond has a way to go before reaching 1.74%, its high for calendar year 2021. The podcast hosts note the T-bill market’s response to the debt ceiling theatrics (7:34). 

A mixed bag of positive and disappointing news on the jobs and unemployment front (8:24) had Jeff and Sam asking about the implications for a possible tapering of asset purchases by the Federal Reserve. Looking ahead, for the week of Oct. 11-15, among other data points, Jeff and Sam will be looking for how the Consumer Price Index for September compares to expectations of a year-over-year rise of 8.8% and what is to be gleaned from the release of the next batch of FOMC minutes.

MMM Episode 36: T-bills Handicapping Congress, a 10-Year Breakout and Triple Witching Hours

The market week of Oct. 11-15, 2021, as co-hosts Jeff Mayberry and Samuel Lau take note, witnessed a wide rally across asset classes, including commodities, bonds and stocks as measured by the S&P 500, apart from the communications services sector, which was weighed down by one of its component stocks (2:30). Turning to the Question of the Week (14:00), Sam explains the wide differences exhibited in natural gas prices moves in different markets for that commodity around the world. On the inflation front, while consumer and producer prices In September posted impressive gains relative to past years (10:42), the co-hosts surmise that those increases were below market expectations . The coming week of Oct. 18-22, Messrs. Mayberry and Lau note, has little in the way of scheduled macroeconomic news, although they’ll be curious to see what surfaces from the Wednesday release of the Federal Reserve’s Beige Book summary of economic activity (31:17).

MMM Episode 37: Broad Rally, Differential Nat Gas Markets and Seeing Beige

After reviewing the week’s positive performance for stocks, negative performance for bonds, a boring Beige Book and a limited crop of macro news, Jeff Mayberry and Samuel Lau turn to the Question of the Week (16:31): the ins and outs of bank debt, aka leveraged loans or senior loans. Credits in this $1 trillion+ market, Sam notes, sit atop their corporate issuers’ capital structures, in fact, “senior to bondholders, both senior and subordinated bonds.” Senior loans, he points out, are floating rate, potentially attractive in times of rising rates and economic growth. However, this asset class comes with unique features and risks not typically encountered with marketable securities, including trade settlements that can take up to two weeks. 
During the podcast’s review of market activity for the week of Oct. 18-22, Jeff takes note of the five-year Treasury yield (3:02) closing about 120 basis points and asks whether that will form the new floor for this part of the belly of the curve. In a related development, Sam also discusses “skyrocketing breakevens” in the Treasury/TIPS market. For upcoming macro news for the week of Oct. 25-29 (32:44), the podcast co-hosts will be on the lookout Thursday for the preliminary GDP release for the third quarter and Friday for the personal consumption expenditure deflator, the preferred inflation indicator of the Federal Reserve.

MMM Episode 38: Boring Beige Book, Interesting Loans and Skyrocketing Breakevens

DoubleLine’s Jeff Mayberry and Samuel Lau salute both Sunday’s arrival of Halloween and the more controversial recognition of National Candy Corn Day on Saturday before running the market numbers for the week of Oct. 25-29. The last week of October delivered another strong performance from the S&P 500 Index, contributing to a strong month. Energy was down for the week but finished the month strong. Jeff and Sam break down the U.S. Treasury yields for the week with a note on how the shorter part of the curve might react to Fed Chair Jerome H. Powell’s talk on taper next week. Their market discussion wraps with the year-to-date performance of the volatile assets Bitcoin, up 115%, and natural gas, up 120%. Over in Macro Land, Jeff and Sam take a look at home price appreciation, GDP and the supply chain issues contributing to empty shipping containers and barren car dealer parking lots (10:56). Looking to next week, they preview ISM manufacturing and service numbers but predict the focus will be on Powell’s taper talk at the FOMC meeting – and how he will field questions on interest rate hikes (31:25).

MMM Episode 39: Candy Corn Conflict, Natural Gas vs. Crypto and Lessons on Student Loan ABS

Jeffrey Mayberry and Samuel Lau cover the Nov. 1-5 week’s rise in equities, credit, a surprising easing in the 10-year Treasury yield (3:10) and slight weaknesses in Bitcoin and commodities. Notwithstanding a hiccup in commodities, Jeff sees a bullish case for the asset class. Commenting on oil’s consistent closes above $80 a barrel (7:19), he calls recent talk of $100 oil “a little far-fetched, but certainly $90 seems like it could happen depending on how supply comes out.” Then they turn to the week’s macro news, including strong readings for both ISMs:  the Institute for Supply Chain Management’s reports on the manufacturing and service sectors of the U.S. economy (10:38). 
For the Topic of the Week, Jeff and Sam turn to the Nov. 3 meeting of the Federal Open Market Committee (FOMC), including Fed Chair Jerome Powell’s news conference following that session of the FOMC (15:14). The podcast cohosts evaluate the Fed’s guidance on the expected pace of future tapering of the central bank’s asset purchases, including in the light of an “offsetting” volume in U.S. Treasury issuance. They poke fun at Powell’s press remarks (20:06), which were filled with examples of Yoda-like “circular logic,” “dancing around” the Fed’s meaning of “maximum employment.” Powell, they observe, seems to have learned the inside-the-beltway art of saying nothing. That said, Jeff and Sam compliment the Fed chairman for managing to message a two-month forward view on the pace of the Fed’s tapering without jarring the financial markets.

MMM Episode 40: ISMs Big-ism’s, a Taper Pacer and Powell Channeling Yoda

After reviewing the markets and macro news for the week of Nov. 8-12, Jeff Mayberry and Sam Lau turn to an in-depth discussion of the Strategic Petroleum Reserve (14:48) and proposals to not only draw down the SRP but also to revive a ban, lifted in 2015, on the export of U.S. oil. The MMM hosts note the U.S. presidents have used their executive authority to release SRP crude into the market not only to lower energy prices, as is being proposed now, but also in response to dislocations and shortages in the energy sector due to natural disasters (most often hurricanes) and wars involving oil-producing countries in the Middle East. Drawdowns have even been used to paper over the federal deficit, causing the hosts to question how “strategic” the petroleum reserve really is. 

Jeff and Sam also survey the latest readings on the Producer Price Index and the Consumer Price Index as well as a variety of other inflation indicators (7:01). The verdict from those gauges, they conclude, is that rising prices are not only high but persistent, rebutting central bank officials’ earlier reassurances that high inflation would prove “transitory.” Given the accumulating data of high and sticky inflation, Jeff and Sam will be watching scheduled speeches by Federal Reserve officials the week of Nov. 15-19 for signs of a rethinking in monetary policy (38:44).

MMM Episode 41: Broad, Sticky Inflation and the Not-So “Strategic” Petroleum Reserve

Jeff Mayberry and Sam Lau spend the Friday before Thanksgiving recapping the continued weak path for energy in the markets and reviewing a light load of macro data for the week of Nov. 15-19. Sam cites speculation about tapping the Strategic Petroleum Reserve, discussed in last week’s episode*, as detracting from portions of the energy sector (2:38). Bitcoin, up about 100% on the year, was down for the week as a possible precursor to the crypto bounce that has come during holiday seasons (7:20). 

For the Question of the Week (14:07), Jeff and Sam break down the concept of financial repression, an intimidating moniker for a negative-real-yield scenario that functions as a tax on savers to the benefit of borrowers, particularly the government. Their deep dive includes discussion of the impact of such an investment environment (20:06) and coverage of some sectors that could provide positive returns (26:20), including a trio of previous QotW topics**: preferred stocks, closed-end funds and bank loans.

Jeff and Sam close the podcast by turning to the week ahead (31:39), including whether Jerome H. Powell will be enjoying Thanksgiving as the reappointed chair of the Federal Reserve or if he will be unseated by Lael Brainard (36:50). Betting markets favored Powell at about 60-40 at the end of the week. This episode was recorded Nov. 19, 2021.

Monday Morning Minutes

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