Yield Curve Control Waiting in the Wings? (E215)

DoubleLine Portfolio Manager Jeffrey Mayberry and Fixed Income Asset Allocation Strategist Ryan Kimmel recap the week ended June 25, featuring a run of daily highs for the S&P 500 Index buoyed by resurgent retail speculation, a pretty good week for bonds (3:58) and more struggles for commodities (6:00). Over in Macro Land (7:15), it was a light week of prints, including a dip in the LEI, some soft home sales data and a mixed picture for PMI manufacturing and services. Next week (14:20) will bring the FOMC meeting and the possibility for rate-cut dissent drama and potential Fed chair auditions as well as labor, inflation and GDP numbers.

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough survey the week ended July 18, including tech-driven new highs in equities (0:46), a bond market shaped by a steepening yield curve (2:28) and gains in the broad commodity market (4:42). The week’s macro news (6:52) was led by tame reports on the consumer and producer price front. Core CPI for June posted its fifth consecutive monthly surprise to the downside versus consensus expectations. Notwithstanding a short-lived media trial balloon from the Trump administration about firing Fed Chair Jerome Powell, the markets (16:09) are pricing in no action on the fed funds rate at the Federal Open Market Committee meeting on July 30, and only two cuts in the second half of 2025.

For the week ended July 11, DoubleLine Portfolio Manager Eric Dhall and Fixed Income Asset Allocation Strategist Ryan Kimmel first sort through a pause in the stock rally (0:47), bonds (2:34) giving back a bit on higher rates and higher commodity prices (4:34) amid U.S. tariffs announced on copper. While “copper got hit with a 50% tariff in the U.S.,” Eric Dhall notes July 11 that copper prices fell on the London Metal Exchange over the week while rising 9% in the U.S. “A bit of a mismatch there depending on where you’re delivering copper.” The impact of the tariff remains an open question. “It depends on how the tariff applies. Does it apply to raw copper ore? To finished copper? It’s a complicated beast. That’s why you didn’t see the U.S. price surge more than that 9%.”   Ryan Kimmel (6:19) notes that stocks seem to be interpreting tariff drama as negotiating tactics rather than a serious threat to growth. Meanwhile, in the wake of passage of President Trump’s “One Big Beautiful Bill,” he sees “higher term premium baked into the long end” of the Treasury yield curve. Surveying macro news for the past two weeks (7:42), Eric Dhall and Ryan see more weakness in labor markets than would suggest a superficial read of headline household and establishment survey numbers, with the prospects of a diminishing labor force given an expected ramp-up of illegal immigrant deportations.   Turning to Fed watch (13:52), Eric and Ryan note increasing odds of a cut in the federal funds target rate at the Sept. 17 meeting of the Federal Open Market Committee. They ponder the prospect of an “Apprentice-style battle” among candidates to succeed Chairman Jerome Powell. All eyes during the July 14-18 week (15:20) will be on Tuesday’s release of the June CPI report, especially any indications of tariff impacts, and Wednesday’s release of the PPI.

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough recap market performance for the week of June 23-27 as well as the month and second quarter, which was a pretty good run for asset holders. They review the healthy performances for stocks (00:18) and bonds (2:48), recap a rough period for commodities (4:04), check in on the safe-haven assets of gold and Bitcoin (5:02) and discuss the economic bellwether of copper and the U.S. dollar (5:42). Over in Macro Land (7:01), prints include prelim U.S. PMI numbers for June that reflect a decent expansion period; home prices in April experiencing their second month of contraction (9:31); a new Q1 GDP estimate (11:19), which prompts Eric and Mark to note the importance of waiting for the merged data for trade-flow-impacted Q1 and Q2; and PCE numbers that are moving in the Fed’s direction (17:53).   There will be no episode next week with Friday’s holiday, but the show will return July 11. Have a Happy Fourth of July!

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough recap a relatively flat market week shortened by Thursday’s Juneteenth federal holiday. In their rundown of stocks (1:00), fixed income (2:20) and commodities (4:30), Eric and Mark note there was little market volatility despite ongoing trade policy uncertainty and the Israel-Iran conflict. Gold, a safe-haven asset, was actually down on the week. Over in Macro Land (7:01), the week’s prints included retail sales, import prices and jobless claims, with the market seeming to shrug in response to each release. The big news event of the week was Wednesday’s FOMC meeting (11:38), with the Fed keeping rates steady. Eric and Mark discuss the details of the FOMC officials’ decision to sit on their hands and the prospects for cuts this year. Next week’s prints (17:19) will include PMI manufacturing and services, housing prices, consumer confidence, durable goods and inflation. This episode was recorded June 20, 2025, before market close.

DoubleLine Portfolio Manager Jeff Mayberry and Fixed Income Asset Allocation Strategist Ryan Kimmel June 13 survey a mostly quiet week in markets (0:50) amid encouraging CPI and PPI news (5:30), albeit obscured by ongoing uncertainty over trade tariffs. Among other macro news (12:48), Ryan Kimmel points to a news report that companies appear to be absorbing tariff costs rather than passing them along in the form of price hikes to consumers. Looking ahead to the June 18 FOMC meeting (18:58), Jeff Mayberry notes Fed Funds rate futures are pricing in the first of just two cuts in 2025 for Sept. 17.

DoubleLine Portfolio Manager Jeff Mayberry and Analyst Mark Kimbrough sort through a positive week ended June 6 for stocks (0:59) and commodities (4:36) amid higher yields and volatility for a still range-bound bond market (2:01). After macro news (5:46) including sub-50 ISM manufacturing and services prints for May, nonfarm payrolls for May pushed stock prices and bond yields higher on Friday. Fed funds futures (17:26) on Friday were pricing in one to two cuts for the year, with the first likely cut to come at the Sept. 17 meeting of the Federal Open Market Committee. As labor and price data stand at present, Jeff Mayberry says, “I think we get no cuts this year.” Jeff and Mark will be looking to the Federal Reserve’s annual Economic Policy Symposium Aug. 21-23 and Fed Chairman Jerome Powell’s speech at that event for guidance on the course of central bank monetary policy for the remainder of the year. Looking ahead to the June 9-13 week (19:27), Jeff and Mark will be looking for the May CPI on Wednesday, PPI on Thursday and the University of Michigan’s consumer inflation expectation survey on Friday.

DoubleLine Portfolio Manager Eric Dhall and Fixed Income Asset Allocation Strategist Ryan Kimmel run down the Memorial Day-shortened week of May 27-30 and a mixed-bag for the markets amid May’s volatility. The S&P 500 had a relatively calm week and pretty positive month (00:32), fixed income had a positive week to cap off a month of gyrations (2:36) and commodities had a rough final session to conclude an up-and-down May (4:26). Over in Macro Land (6:11), Eric and Ryan’s review includes a look at some consumer confidence reports buoyed by the trade détente; a PCE print closer to the Federal Reserve’s 2% goal; Fed meeting minutes that point to staying the course on rates; and durable goods orders, with Ryan noting a possibly negative signal in the data. Looking ahead (19:25), next week’s prints will include ISM manufacturing and services reports and the Fed’s Beige Book, but the market’s focus will be on Friday’s jobs report.

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough survey a rough week for stocks and bonds ended May 23, 2025. Those losses followed the May 16 announcement of Moody’s downgrade of the U.S. to Aa1 from Aaa on the rating agency’s outlook for the federal deficit to rise to nearly 9% of GDP by 2035 from 6.4% in 2024. Eric and Mark begin with a dive into fixed income markets (0:30), which saw Treasury yields rise on the long end of the curve. The yield on the long bond Wednesday through Friday closed above previous resistance of 5.00%. “With these concerning fiscal deficits, investors seem to expect more of a term premium,” Eric Dhall notes. “I think that’s the reason for higher rates on the long end of the Treasury curve – as we’ve been saying for a long time at DoubleLine.”   Every sector of the S&P 500 ended the week (9:18) in the red, led by energy as speculators considered the possibility of crude oil production increases by Saudi Arabia in the wake of closed-door meetings by President Trump with leaders of that country as well as Qatar and the United Arab Emirates. Notwithstanding the week’s losses, Eric Dhall notes that all these sectors remained in the green on a month-to-date basis. Commodities (11:47) were up, led by precious metals but also supported by gains in copper, considered a macro bellwether.   For the week’s macro news (13:00), Mark Kimbrough observes a weak Leading Economic Indicator report and an uptrend in continuing jobless claims. However, he also points to “decent expansions” in the S&P Global U.S. PMI manufacturing and services surveys for May 12-21, the first survey period since the Trump administration paused tariffs. For the week ahead (17:40), Eric and Mark will have on their radar the OPEC+ meeting, durable goods orders, the Conference Board’s consumer confidence report, the second estimate of first quarter GDP, personal income and spending, and the PCE index.

DoubleLine Portfolio Manager Jeff Mayberry and Fixed Income Allocation Strategist Ryan Kimmel chart the powerful market reactions for the week ended May 16 surrounding Monday’s joint decision by Washington and Beijing to move from trade war to trade détente. Stocks (0:34) rallied broadly across all sectors of the S&P 500 except for a light decline in health care. As rates moved higher across the Treasury curve (4:05), traditional investment grade sectors in fixed income posted negative returns while emerging markets debt led in the winners’ circle. Commodities (6:03) declined with industrial metals and livestock diverging higher. On the macro front (7:23), markets welcomed a raft of reports including April consumer and producer prices and PCE-input import prices showing inflation moving in the right direction.   For their Topic of the Week (17:51), Jeff and Ryan delve into the implications for markets, in particular, for the U.S. dollar and other currencies, if the Federal Reserve were to engage in yield curve control as a means to manage the government’s ballooning debt service on the national debt. Among other aspects of this question, they examine the rare historical precedents of yield curve control by the Bank of Japan (2016-2023) and the Federal Reserve (1942-51). The latter case, however, was a mechanism to assist Washington in funding the Second World War and afterward persisted during the first years of Bretton Wood foreign exchange regime. Under Bretton Woods, the dollar was set to an exchange of $35 per ounce of gold with the currencies of America’s trading partners tied to the dollar – a vastly different world than today’s regime of free-floating fiat currencies.