Weekly Market Update October 25, 2023

Bond yields rose sharply last week, with nearly all Treasury yields across various maturities surpassing the 5% mark before moderating later in the week. Even though Federal Reserve Chair Jerome Powell indicated a pause in rate hikes for November, bond investors are looking ahead. Last week's remarks by Powell about inflation remaining elevated and the possibility of more rate hikes if economic data remains robust led to an uptick in rates. (Source: The Wall Street Journal)

There is another force driving rates higher: a supply and demand imbalance for Treasury bonds. On the supply side, the Treasury Department has been increasing the auction size of Treasury bonds and is expected to auction off more than $3 trillion in Treasuries in 2023, higher than any year in the past decade except for the 2020 pandemic surge. On the demand side, the Federal Reserve has implemented quantitative tightening policies by allowing nearly $650 billion in Treasuries to mature and roll off their balance sheet. Additionally, China has also been slowing their Treasury bond purchases over the last decade. (Source: The Wall Street Journal)

This week, third quarter earnings season continues with big tech companies Alphabet, Amazon, Meta, and Microsoft. On Thursday, the first estimate of third quarter GDP is released. On Friday, the Federal Reserve's preferred measure of inflation, core personal consumption expenditures (Core PCE), is released. 

Blueprint Numbers

BIDEN REQUESTS $105 BILLION - President Biden has requested $105 billion from Congress to support security needs for American allies and the U.S. southern border. The package would include $61 billion for Ukraine, $14.3 billion for Israel, $2 billion for Taiwan and Indo-Pacific security, $9 billion for humanitarian efforts, and $6.4 billion for the U.S. southern border. (Source: CNBC)

JOBLESS CLAIMS DEFY GRAVITY - Despite the Federal Reserve's efforts to slow the economy and rein in inflation, the labor market reported 198,000 jobless claims last week, a nine-month low. The labor market has continued to support robust U.S. consumer spending, current strong points in the U.S. economy. (Source: Associated Press)

LONG-TERM CARE STATS - According to the U.S. Department of Health and Human Services, there is a 70% chance that American's age 65 or older will need long-term care at some point, and it comes at a cost. The median cost per month for an assisted living facility is $4,051, and double that for a nursing home. (Source: Yahoo Finance)

ORANGE JUICE HIGHS - Frozen concentrate orange juice futures have more than tripled since late 2021 as citrus groves have experienced a greening disease and extreme weather. A gallon of orange juice averaged $9.18 over the past four weeks as orange production has declined 50% from two years ago. While Florida is commonly known as the orange capital of the world, it is Brazil that produces roughly 70% of the world's orange juice. (Source: The Wall Street Journal)

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