Today's Post - https://bahnsen.co/46j9PPy

Following another down day yesterday, we got a little reprieve in markets, with both stocks and bonds posting gains on the day. The biggest economic news on the day was the miss in ADP Payroll numbers, which starkly contrasted with yesterday's big upside surprise in the jobs openings report. More openings but fewer private payrolls could either mean there is a cyclicality or variability around the timing of correlation between the two or could have just been from the number of new job openings TBG just posted this month. Still, either way, the more significant number will be this Friday when nonfarm payroll numbers come out.

While yields came off following today's economic data during the trading day, it is notable to see 10-year yields hit 4.88% in overnight trading and 30-year treasuries reach 5%. As a result, US debt interest expense is now just over 14% of tax revenue, which has not been the case since the late 1990s and has historically been a threshold in which fiscal austerity begins to show. Fact notwithstanding, last night, we also saw the ousting of the Speaker of the House, Kevin McCarthy, by his party for the first time in history for getting a bill passed not to cut spending to avoid a government shutdown.

I strongly suspect deficits at 7% of GDP during full employment will keep volatility high in Washington as tough decisions must be made. While the Fed says higher rates are here for longer, I remain skeptical, given the tightening financial conditions we have already seen.

Links mentioned in this episode: