The past week’s economic reports were generally near expectations, although new home sales registered a subpar surprise for May. The Fed’s favored inflation barometer, the Personal Consumption Expenditure (PCE) deflator index, rose .4% M-o-M in May, or slightly below the market’s expectation of .5%. This result prompted a dip in yields on Thursday morning. But it should be noted that the core-PCE, at .3% M-o-M, remains well above the Fed’s target. Moreover, the core reading for April was revised up from .2 to .3%. The Mideast quasi-resolution has helped to contain term yields and dial down inflation expectations, at least for now. But the situation remains fluid. Note that Friday, July 3rd is a market holiday but not a banking holiday; the FHLBNY will be open. Also note that there is an early-market close on Thursday, July 2nd. Kindly consult with the desk regarding transactions near this timeframe.

Back by popular demand, Frank Farone, Managing Director of Darling Consulting Group, returns to join us once again for an informative session focused on Liquidity and Asset/Liability Management. Frank will address key challenges and provide actionable strategies to help FHLBNY members stay resilient and take advantage of the new rate environment now and in the months/years to come.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…