Weekly Economic Update: November 4th 2019
• Treasury yields settled lower last week as the Fed eased interest rates. The two-year Treasury note finished the week seven basis points lower to a yield of 1.56%. The yield curve steepened last week as the spread between the three-month Treasury bill and the ten-year Treasury note widened to a spread of +20 basis points.
• The Fed cut the fed funds rate by 25 basis points to a new range of 1.50% to 1.75%. The cut was considered to be the last in this cycle until economic data weakens further. The caution on future cuts was supported by better than expected news on employment.
• During the month, the economy generated 128 thousand new jobs, well above the consensus estimate of a 75 thousand gain. What’s more, the payroll increases for the previous two months were revised up by 95 thousand.
• Heading into the Fed meeting, there was a fair amount of expectation that the Fed would follow up the expected rate cut this week with another as soon as December. However, the policy statement put the kibosh on that expectation. Odds now favor April 29 as the next Fed meeting where the Fed would lower rates by another 25 basis points.