The “must pass” stimulus has been rocked by conflicting messages as markets plunged yesterday on “no deal until after the election” talk followed by some optimism today. The familiar pattern played out this week. Federal Reserve bankers pleading with Congress that their monetary policy only goes so far and that fiscal policy is desperately needed. The bankers indicated that the June-July bounce back in hiring was “low hanging fruit” and that the remaining job losses may be long term or permanent. Disney, Regal Cinema and the airlines announce major job cuts in the last few weeks. It seems that the private sector is not ready to create jobs without assistance. The next week or two should be interesting.
Treasuries & Rates: After sitting in a tight range of about 0.65% for weeks, the 10 year T is at 0.78% today, a 4-month high. Why? Disappointment over the Fed’s September meeting minutes. As record deficits create huge supplies of treasuries, there has been some hiccups in long bond purchase volume. The Fed was expected to announce “yield curve control” measures soon, promising to keep 10 and 30 year rates within a desired range by purchasing enough treasuries to push the yield low enough. The minutes today showed that as of now, this is not the policy. So some selling occurred on that announcement and on today’s muted optimism for a stimulus deal. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners