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Monetary

Why 2 Percent Inflation Is NOT ‘Mission Accomplished’

The biggest misunderstanding in the markets right now is that to keep expected inflation well-anchored at 2 percent, inflation must <i>undershoot</i> 2 percent for some time. This implies that interest rate futures curves are mispriced, and that the probability of a ‘soft landing’ is lower than assumed. Plus: we show that the rally in oil has become fractally fragile, and recommend a tactical underweight.

Counterpoint by Dhaval Joshi
Re-Estimating Net Interest Expense
BCA Research’s US Bond Strategy service concludes that recent BEA data are understating corporate net interest expense by a significant amount. Given the recent climb in interest rates, it would be reasonable to expect that corporate interest expense would…
Daily Insights
Another BoC Rate Hike?
Tuesday’s release of Canadian CPI in August raised concerns that inflationary pressures are picking up again. Headline CPI inflation rose from 3.3% y/y to 4.0% y/y – above expectations of 3.8% y/y and marking the second consecutive increase after it fell to…
Daily Insights
Are Higher Interest Rates Hurting Corporate Balance Sheets?

Top-down measures of nonfinancial corporate sector balance sheet health have been flattered in recent quarters by inaccurate data on interest expense. After correcting for the inaccurate data, we see that our best measures of corporate balance sheet health show a persistent steady deterioration.

US Bond Strategy by Ryan Swift
Inflation Is Still A Concern
Google searches for “inflation” by US users have been on a general downward trend over the past year. This is in line with developments in realized inflation as annual core CPI inflation peaked last September. Similarly, market- and survey-based measures of…
Daily Insights
Europe: Inflation Will Come Back
According to BCA Research’s European Investment Strategy service&nbsp;European inflation is likely to remain stubborn through the remainder of the decade, since the working-age population’s decline will keep the labor market tight. European rates have…
Daily Insights
US Homebuilder Sentiment Sours In September
After a steady rebound in the first half of the year, the US NAHB Housing Market Index’s 5-point decline to 45 in September was a disappointment to consensus estimates of a 1-point decrease. It marks the second consecutive deterioration and brought down the…
Daily Insights
Some Upcoming Upside For Small Caps?
Monetary policy is difficult to calibrate: it is hard to get it just right. The Global Investment Strategy (GIS) service has been iterating that while the Fed could temporarily achieve a soft landing, there is much uncertainty surrounding the idea that the…
Daily Insights
Done, For Now

The ECB is done lifting interest rate for the cycle and its next move will be a cut next year. Yet, European rates will climb even higher in the second half of the decade.

European Investment Strategy by Mathieu Savary
Nothing In CPI To Prevent A Fed Pause

The implications of this morning’s CPI report for Fed policy, Treasuries and TIPS.

US Bond Strategy by Ryan Swift

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