D.C. and a Virtual Jackson Hole Share Spotlight
The annual symposium at Jackson Hole is usually a showstopper as central bankers from around the world convene in the bucolic outpost of Jackson Hole. This year it will be a mostly virtual event but the highlight will surely be the keynote address by Chair Powell on Thursday. We don’t expect any material change in policy from what we heard at the July 29 FOMC meeting or the recently released minutes from that meeting. The gist of the minutes is that while the Fed is encouraged by the rebound in activity they are also concerned with the fragility of it, especially as the virus remains a health risk for most of the country and the world. Thus, we don’t expect a major shift but rather more of the dovish tone and concern for public health that will keep the Fed firmly in accommodative mode. With a stimulus bill all but dead for now, the focus will start to shift to signs that the fading stimulus is starting to show in consumer behavior and hard data. So far we haven’t seen either other than the general slowing in momentum from June to July, save the housing sector. If signs start to appear of faltering confidence, and spending, and hiring slows precipitously, you can expect renewed enthusiasm for a stimulus bill in the halls of Congress.
Derivative Market Rates 
Brokered Deposit Rates| Treasury Curve | Today | Week Change |
|---|---|---|
| 3 Month | 0.09% | UNCH |
| 6 Month | 0.11% | UNCH |
| 1 Year | 0.12% | -0.01% |
| 2 Year | 0.15% | +0.01% |
| 3 Year | 0.17% | -0.01% |
| 5 Year | 0.27% | -0.02% |
| 10 Year | 0.64% | +0.05% |
| 30 Year | 1.35% | -0.08% |
| Fed Funds | 0.25% |
| Prime Rate | 3.25% |
| 3 Mo LIBOR | 0.25% |
| 6 Mo LIBOR | 0.31% |
| 12 Mo LIBOR | 0.44% |
| Swap Rates | |
| 3 Year |
0.232% |
| 5 Year | 0.320% |
| 10 Year | 0.631% |
| Date | Statistic | For | Briefing Forecast | Market Expects | Prior |
|---|---|---|---|---|---|
| Aug 24 | Chicago Fed. National Activity Index | Jul | 3.69 | 3.70 | 4.11 |
| Aug 25 | S&P CoreLogic CS 20-City HPA YoY | Jun | 3.60% | 3.60% | 3.69% |
| Aug 25 | Conf. Board Consumer Confidence | Aug | 93.0 | 93.0 | 92.6 |
| Aug 26 | Durable Goods Orders | Jul P | 4.4% | 4.5% | 7.6% |
| Aug 27 | GDP Annualized QoQ | 2Q S | -32.5% | -32.5% | -32.9% |
| Aug 27 | Fed Symposium at Jackson Hole | Jul 27 | NA | NA | NA |
| Aug 27 | Pending Home Sales MoM | Jul | 2.0% | 2.0% | 16.6% |
| Aug 28 | Personal Spending | Jul | 1.5% | 1.5% | 5.6% |
| Aug 28 | PCE Core Deflator YoY | Jul | 1.3% | 1.2% | 0.9% |
Top 5 Events for the Week
August 24 — 28, 2020
1. D.C. Developments — All Week
2. Fed’s Jackson Hole Symposium — Thursday
3. July Personal Income & Spending — Friday
4. August Consumer Confidence — Tuesday
5. July Durable Goods Orders — Wednesday
1. DC Developments — All Week
With a stimulus bill all but dead for now, the focus will start to shift to signs that the fading stimulus is starting to show in consumer behavior and hard data. So far we haven’t seen either other than the a slowing in momentum from June to July, save the housing sector. If signs start to appear that confidence is faltering, and spending, and hiring drops precipitously you can expect renewed enthusiasm in the halls of Congress for a stimulus bill.
2. Fed’s Virtual Jackson Hole Symposium — Thursday
The annual symposium at Jackson Hole is usually a showstopper as central bankers around the world convene in the bucolic outpost of Jackson Hole. This year it will be a mostly virtual event but the highlight will surely be the keynote address by Chair Powell on Thursday. We don’t expect any material change in policy from what we heard from the July 29 FOMC meeting and the recently released minutes from that meeting. The gist of the minutes is that while the Fed is encouraged by the rebound in activity they are also concerned with the fragility of it, especially as the virus remains a health risk for most of the country, if not the world, and fiscal stimulus fades. Thus, we don’t expect a major shift but rather more of the dovish tone and concern for public health that will keep the Fed firmly in accommodative mode.
3. July Personal Income & Spending — Friday
Personal income is expected to decline for the third straight month, this time by – 0.2% month-over-month versus –1.1% in June. Personal spending, meanwhile, is expected to increase 1.5% versus 5.6% increase in June. It’s just another report, outside of housing, with signs of slowing from June into July. Meanwhile, the core PCE, the Fed’s favorite inflation indicator, is expected to rise a bit to 1.2% year-over-year, versus the multi-year low of 0.9% in June. the lowest since December 2010.
4. August Consumer Confidence — Tuesday
With two-thirds of the economy consumption-based it’s critical to look at the confidence of said consumer for tells on future spending. While there was a predictable dip at the early stages of the pandemic it never fell to levels of the Great Recession, perhaps due to the stimulus measures and furloughed workers hopes for a quick return to work. For August, confidence is expected to lift a bit from July going from 92.6 to 93.0. The expectations component had a dip in July to 91.6 from 106.1 in June. Forecasts are that it will continue to slip a bit more in August.
5. July Durable Goods Orders — Wednesday
The July Durable Goods Orders Report is expected to mirror other recent reports with gains for the month but off the rebound experienced in June. Overall orders are expected to be up 4.5% versus 7.6% in June. Orders ex-transportation are expected to be up 1.9% versus 3.6% the prior month. Shipments of nondefense ex-air goods—a proxy for business equipment— is expected to be up 2.00% versus 3.3% in June.
Yield Universe
Thomas R. Fitzgerald
Director, Strategy & Research
Tfitzgerald@centerstatebank.com
