Economic Data on Deck

Yesterday was a very ugly day in both interest rate and stock markets–it seems to me that global investors are starting to take higher interest rates seriously versus driving equity prices higher at every piece of news whether it be good or bad. We were in a cycle of ‘all news is good news’, but maybe we are now moving to the ‘all news is bad news’ cycle. Poor treasury auctions are starting to drive the point home that the U.S. has to get it’s economic house in order.

This morning we have some economic news coming which will add little bit to the discussion. We have the weekly 1st time unemployment claims which is expected to show claims at 218,000 versus last weeks 215,000—what we really need is 230,000. 230,000 would help to cap interest rates for a day, but given that we have the personal consumption expenditures (PCE) it may not last long as a hot PCE inflation number could ‘blow the lid off’ interest rates. Of course a cool PCE would cap interest rates at current levels. We also have the 1st revision of 1st quarter GDP–on a historical basis I don’t recall how this may affect markets, but given the current sensitivity of markets no revision would be best.

I see that giant Brookfield Infrastucture Finance LLC priced their new subordinated notes last night with a coupon of 7.25%. The maturity date is way out in 2084. The permanent NYSE ticker will be BIPJ when it starts to trade in a week or so. The pricing term sheet is here.

Yesterday was a red day for our accounts–not a surprise given interest rates. It will take some time–a couple months–to get back to accounts record high levels and that assumes flat interest rates. I did nothing at all in markets—boring but given the current conditions and potential for higher rates it is the right thing to do. Will just let CD and short maturity issues ‘carry the water’ for now.