Locking bias

It’s a day filled with speeches from members of the Federal Reserve, with six of them scheduled to talk today.  After Donald Trump’s sharp criticism of Janet Yellen and the Federal Reserve, we could see the questions from their audiences focused on The Donald’s statements.  It’s fascinating to see how a couple of Fed members are changing their tunes and now verbally making arguments for a rate hike.  At this point, it seems likely that December will be the month for a hike.  It won’t happen prior to the election (as Donald would hope for), and since there isn’t a press conference following November’s Fed meeting, that month is off the table.  So, if it will be in 2016, December is the likely month for a hike. 

Durable Goods for the month of August came in at unchanged levels from the month prior.  Although not a strong report, it was better than the markets’ expectations of -1.9%.  Durable Goods excluding transportation were at -0.4%, which also beat expectations of -0.5%.  This was not favorable news for the bond markets, but the reaction was minimal. 

Bonds remain trapped beneath the ceiling that has capped bonds for months.  The best hope for a breakout is if Friday’s Personal Consumption Expenditure (PCE) report comes in weaker than expectations.  In the meantime, we will maintain our locking bias.