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Bob Carey
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  US Economy and Credit Markets Ended July 16, 2021
Posted Under: Weekly Market Commentary

 
Federal Reserve Chairman Jerome Powell presented to Congress last week and indicated that the central bank would raise interest rates should inflation show any indication of being out of control but he repeatedly stated that he expects price inflation to be transient in nature. While granting that inflation is currently higher and more persistent than expected, he continues to believe it will reverse with the resolution of supply bottlenecks. He also discussed the monthly rate of Treasury and mortgage securities purchase, currently at $120 billion, and noted that while some members would like to taper purchases, he didn't feel it was an urgent step needing to be taken. The market seems to be agreeing with the Chairman's assessment as 10-year treasury yields fell for a third straight week. The upward price action in bonds has defied expectations of reopening strength leading to a steepening of the yield curve. As concerns about the delta variant, global reopening, and economic growth mount, there has been a correspondent rise in negative yielding debt. According to Bloomberg, negative-yielding debt rose $730 billion, to $15.2 trillion, for the week ending July 16. These concerns and an OPEC+ spat have also weighed on oil prices as the market worries a supply gut could be forthcoming. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: June Housing Starts (1.59M, 1.57M); Wednesday: July 16 MBA Mortgage Applications (N/A, 16.0%); Thursday: July 17 Initial Jobless Claims (350K, 360K), June Leading Index (0.9%, 1.3%), and June Existing Home Sales (5.9M, 5.8M); Friday: July preliminary Markit US Manufacturing PMI (62.0, 62.1).
Posted on Monday, July 19, 2021 @ 8:06 AM • Post Link Share: 
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