NY Fed: Bond Market Liquidity Hasn't Deteriorated
For the umpteenth time, the folks at the NY Fed have
extensively researched and published a piece on bond market liquidity.
Their determination? Bond
market liquidity has not deteriorated.
that have to trade daily might disagree. It would appear that some
might disagree with the Fed on the soon-to-be coming inflation too.
In fact, short of normalization,
the markets disbelieve the Fed's powers of analysis.
UNreinvestment we're calling it, may begin at the end of the year.
Illinois Passes a Budget...Finally
It was only a couple years
late, well 3 but who's counting? Threatened
with junk status by S&P if they couldn't get a deal by July 1,
legislators reconvened on Saturday, July 2.
With $15 billion in unpaid bills and a deficit of $6 billion
last year, yields on Illinois municipal debt continued to increase through
the July 4 break.
Reducing spending by $2 billion and increasing income tax by
$5 billion (32%), the package does not address the state's $130
billion unfunded liability in employee pensions or
do enough to pay down bills according to Moody's.
Economy and Rates
The long end has remained stubbornly below 3 % (30yr, 2.85%)
and 10s touched the 2.4% level only to trade back within the previously
established range (10yr, 2.27%).
On Tuesday, volatility jumped when large
10 year futures buy trades were executed about 8:38am EDT.
Two trades amounting to more than $3.2 billion set the tone.
Employment continues to show strength (+222K June +14K
prior) as do earnings (+2.5% YoY) but PPI (2.0 and 1.9 ex food and energy
YoY and CPI (1.6% and 1.7% ex food and energy YoY) do not. CPI last 100
years here. The general sentiment is lower for longer - currently.
Client results shown are calculated using SIA standard
investment formulae for portfolios AQS has managed in excess of one
year. Each portfolio complies with governing investment statues,
regulatory testing standards and metrics. Results vary based on the
client's specified investment policy, risk tolerance, profit objective and
product mix. AQS works with each client to develop a global
understanding of objectives for income and surplus growth as well as
product opportunities that represent synergies in terms of growth and