Bond Yields, Inflation Pressures and the Consumer Squeeze
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What does the latest Canadian CPI data reveal about inflation?
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All right. Welcome back. I think we're live for the, what is this, our fifth? Friday. Something like that. Yeah. Friday macro lunch. It's funny, like last week we were like, oh yeah, we should just talk about bond yields. I mean, it seems like they're pretty, you know, like it's a story, but it wasn't like, last week it wasn't crazy. Like this week is absolutely nuts what is happening with bond yields. So talk to me a little bit about what we're going to be going through today.
Yeah. So obviously, speaking of bond yields, we'll touch too on Canadian CPI came out earlier this week. Probably not too long, but I think it fits in well. I also went over a Walmart lows and Home Depot's earnings. So not to go into too much detail for those, but just some big macro takeaways and what they're seeing, especially when it comes to fuel cause. But for you, obviously, being in real estate, what they're also seeing on the Homeowner spend, do it yourself, renovation projects like that, especially obviously Home Depot and Lowe's. So that's a good indicator. And then looking at the bond market in general. So I think what we'll look at U.S. bond yields probably touch on the Japanese JGBs. And probably look at the Canadian bond yields as well.
See what's going where that's going, what's causing it to rise. I mean, what's most likely causing it to rise. And I don't know if you looked at that recently, but the market's expectation for the Fed's fund rates has changed dramatically over the last couple of weeks or the last week.
Well, isn't it is like more likely to see a hike than a cut? Yeah.
Yeah, exactly. That's it.
Yeah. So what do you use? Like CME FedWatcher for that?
Yeah. I usually go on the CME FedWatch. I find that the tool is really good. So if I can share my screen.
Yeah.
Go ahead. If you have it up. Okay. So there you go here. And then the probabilities I've like, this is the most.
So crazy. Yeah.
I'll try to just to. Zoom that in a little bit so it's more visible for people. So yeah, basically what you're seeing is the further we get into the year, the more likely rate hike is. Crazy. Yeah, which is pretty crazy. And when you start getting to, well, I actually increased since I last looked at this this morning. So that just tells you something. So I'm looking here starting in October. So for the October meeting, there is more chance of a hike by then than the first feds find the rate being at the current level so it's around 46 to current level and i guess the balance would be some kind of a hike and as high as like i guess a 50 to 75 basis point hike from here too so those are pretty low when you get to the 50 to 75 basis point increase but it actually increases further down and you're not seeing any
rate cuts priced in, even marginally, I'm talking 12%, 13% here until the end of 2027, which is pretty wild.
Crazy. Okay. So this is my favorite chart. I pulled this up in the last couple of episodes, but the market is always wrong about what the Fed will do, right? Yeah. So, so what do you, like, what's your read? Like the, like, do you see this actually happening? Like what, with what?
How are rising transportation costs affecting consumer spending?
I don't know. Like, what are we, what are we looking at here? This is a, this is from like the 2020, but still like you can see all of the areas where the market was incorrect. Right. Why, why would the market be correct on this today? Like. And what are your thoughts? Is this a credible outcome for what the bond market is thinking? Should people actually be concerned the rates are going to go up? Or are you sort of still of the opinion that we're going to see a constricted consumption, which seems like it's already taking place.
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Chapters
8 chapters
1
What does the latest Canadian CPI data reveal about inflation?
0:01–3:54
2
How are rising transportation costs affecting consumer spending?
3:54–6:42
3
What is driving the surge in U.S. bond yields?
6:42–7:57
4
How do changing Fed rate expectations impact the market?
7:57–12:21
5
What are the implications of higher bond yields for the housing market?
12:21–15:08
6
How are homeowners coping with rising mortgage payments?
15:08–18:55
7
What trends are emerging in consumer behavior amidst inflation?
18:55–21:09
8
What potential risks does the bond market face in the current climate?
21:09–49:54
Speakers
3 identifiedMore from The Canadian Investor
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