In data, ADP payrolls beat estimates, while ISM Services missed expectations coming in at 52.8 vs. 54.2 estimates. The ISM miss was attributed to a decline in new orders and some commentary pointed to weather as a factor.
The Treasury Quarterly Refunding Announcement was largely in-line with expectations and did not appear to have anything that spooked bond investors. Heading into the announcement there was some concern that the Bessent treasury would look to term out more debt, which could pressure long-end yields, however the announcement indicated they would keep nominal coupon bond sizes largely the same as prior quarters, making this a largely non-event. This coupled with the ISM miss seemed to increase demand for bonds, lowering yields.
In Fedspeak, Jefferson has advocated a period of holding policy steady in the face of continued policy uncertainty. Barkin mentioned business optimism at the broad based Trump agenda, but also highlighted the uncertainty around the specifics of policy implementation.
All-in-all stocks rose, with the S&P at 6,070 and yields fell with the 2Y back down to 4.20% and the 10Y down ~8bps to 4.43%.
I briefly mentioned international trade yesterday, outlining the high-level benefits and costs. For good measure, I’ll throw in a few tools countries used in an attempt to protect domestic industries, protect new industries, protect strategic industries, increase domestic employment, raise revenue or boost exports. Some of the primary tools used are:
Tariffs (obviously) - these are taxes on imported goods, they can raise revenue, reduce trade deficits and protect domestic industries, but at the potential cost of “deadweight loss” due to inefficient producers to gain a surplus at an expense that outweighs the benefit the consumer gains from previously accessing the world price.
Quotas - what they sound like, they are limits to how much a country imports. Generally this risks a loss to the consumer as supply may not be sufficient to meet demand.
Export Subsidies - payments from the government to exporters in an attempt to increase exports. The general impact is the foreign consumer benefits at the expense of the exporter.
Voluntary Export Restrictions - this could be used to protect a sensitive industry, like chip design.
Anyway, I throw these out there because they all have and continue to be used from time to time and are part of the complexities of negotiating trade.
On the day ahead it’s BoE rate decision and jobless claims are the highlights.
XTOD: “You have a beautiful voice and a beautiful accent. The only problem is I can’t understand a word you’re saying.” Maybe the funniest Trump quote of all time. Instant classic.
XTOD: Super Bowl 59 betting: Report says record $1.39 billion to be legally wagered on The Big Game
XTOD: I’m increasingly convinced that there are only four attributes worth screening for when hiring: 1. Curiosity 2. Persistence 3. Humility 4. Sales
They are, unfortunately, incredibly difficult to discern in an 30 minute interview (how most people structure interviews)
XTOD: Thinking about that C. S. Lewis quote about how courage is not just one of the virtues but the spine of every virtue, and how brilliantly/brutally it frames how virtuous we like to think we are. You're kind, but are you kind when it's hard to be kind? Or just when it's easy
https://x.com/MattWalshBlog/status/1886966377845600416
https://x.com/scotteTheKing/status/1887175604727890054
https://x.com/buccocapital/status/1886929942317031789
https://x.com/DylanoA4/status/1887132170067517514
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