Treasuries function as the benchmark asset in bond markets, underscoring their importance in borrowing rates and global financial conditions. As fears of higher future Treasury supply loom large, bond investors look to certain metrics to help understand how well the market is absorbing increasing levels of public debt. Changes in Treasury yields reflect underlying macroeconomic fundamentals, but they are also driven by central banks’ balance sheet management, the maturity profile of newly issued securities, and the market response when new debt comes to market. In this episode, we talk with Peter Ryan, Managing Director and Head of International Capital Markets and Strategic Initiatives at SIFMA, about the day-to-day mechanics of the Treasury market, how to interpret Treasury auctions, and how rising federal deficits are shaping the longer-term bond market outlook.
The economy has consistently defied expectations since 2020, prompting important questions about the soundness of the models used by the Fed and most economists. High inflation persisted much longer than the Fed predicted, inflation fell substantially without significant labor market weakening, and the economy weathered aggressive Fed tightening by growing above its estimated long-run potential. In this episode, Chris Low, Chief Economist of FHN Financial, and Thomas Coleman, Senior Lecturer at the Harris School of Public Policy at the University of Chicago, reflect on the biggest economic lessons of the last few years and how to reconsider fundamental macroeconomic relationships for future cycles. This interview was recorded live at Morgan’s on Fulton in Chicago on October 16.
With control of the White House and House looking up for grabs, the post-election policy landscape looks highly uncertain only weeks before November 5. The priorities of the new president will run up against an unpredictable amount of Congressional and judicial pushback, creating a wide range of estimates for growth, inflation, federal deficits, and subsequent Fed policy. In this episode, we talk with Lucy Eve, Director of Global Macro-Geoeconomics with Eurasia Group, about the economic implications of various electoral outcomes, what the Presidential winner can do with and without Congressional cooperation, and how to manage risks amidst all the uncertainty.
Unlike the markets for Treasury securities and MBS, the market for loans can be opaque and illiquid, making it difficult for financial institutions to optimize their loan portfolios and find appropriate counterparties with which to buy and sell loans. Periods of macroeconomic and interest rate volatility can also complicate the ability to accurately price loans for assets like commercial real estate. In this episode, we talk with Mitchell Redd, Senior Vice President with the Capital Assets Group at FHN Financial, about bridging the gap between buyers and sellers of loans, the current sentiment surrounding CRE, and how the loan market will change during Fed easing.
Tourism has bounced back after significantly suffering during early pandemic shutdowns. Households across the income spectrum continue to spend on discretionary travel despite economic pessimism and depleted savings. Tourism’s recovery and strength offer insight into how the overall economy has managed to weather high inflation and aggressive Fed tightening without tipping into a recession. In this episode, we talk with Adam Sacks, President of Tourism Economics, about the tourism industry’s challenges since 2020, how tourists have defied predictions of a consumer slowdown, and how spending strength has varied across geographies, income groups, and sectors.
The Atlanta Fed’s GDPNow model is followed closely by financial market participants as an estimate for economic growth. Rather than looking at a long-term horizon, the model focuses only on the current quarter and updates its estimate after important monthly data reports, giving a real-time ability to check the pulse of the economy instead of waiting for each quarterly GDP release. In this episode, we talk with Patrick Higgins, Economist with the Atlanta Federal Reserve and creator of the GDPNow model, about how the model differs from other forecasts, its track record against the official GDP data, and the challenges of forecasting throughout the pandemic.
In his 1986 PhD thesis, Campbell Harvey identified the predictive power of the inverted yield curve through four business cycles. With curve inversion correctly foretelling three more recessions since then, investors this cycle have been anticipating an impending downturn ever since the yield curve inverted nearly two years ago. In this episode, we talk with Dr. Campbell Harvey, Professor of Finance at the Fuqua School of Business at Duke University, about the theoretical foundation connecting the inverted yield curve and recessions, whether this cycle could be different, and what it implies for Fed policy.
Although the Fed appears to be on the cusp of finally lowering interest rates, the rapid monetary tightening of the last two years has caused significant distress within commercial real estate (CRE). The bleakest doomsday predictions have not come to pass, but property owners have still experienced real losses as people shift to new post-pandemic ways of working and living. In this episode, we talk with Joey Kline, Executive Vice President at Jones Lang LaSalle, about where CRE stands more than a year into the Fed’s extended rate pause, how workplaces continue to evolve with hybrid work capabilities, and what areas are set to thrive in the post-pandemic economy.
Almost every state and local government worker in the US participates in a public pension system, creating a strong bond between the fiscal health of states and municipalities and their employees’ retirement systems. These smaller systems have faced the same demographic challenges driving concerns over Social Security’s funding, but they’ve also had to deal with rapid migration flows, fluctuating revenues, and the Fed’s aggressive interest rate hikes during the last four years. In this episode, we talk with JP Aubry, Associate Director of State and Local Research with the Center for Retirement Research at Boston College, about how state and local pensions fit into the national retirement system, their impact on public budgets, and the biggest challenges they face in the coming years.
China’s booming real estate sector helped propel the country’s tremendous growth over the last few decades. This rapid increase in property valuations contributed to a speculative frenzy that led to overindebted firms, unfinished houses, and a collapse in consumer confidence for homeownership. In this episode, we talk with Kristy Hung, Senior Analyst for China Real Estate with Bloomberg Intelligence, about the fundamental forces driving China’s property sector, what caused recent issues at Evergrande and Country Garden, and global investors’ potential exposure to any systemic contagion.
Oil prices have remained relatively steady during the last couple of years despite robust global demand and ongoing geopolitical risks from multiple foreign wars. The ability of domestic producers to increase production has played a large part in keeping prices in check, a notable contrast to only 20 years ago when the US was significantly more dependent on buying energy commodities from abroad. In this episode, we talk with Bryan Chapman, Market President for Energy Finance with First Horizon, about the multi-decade transformation of the US oil industry, the most important forces driving the industry today, and how oil companies are planning for the future.
As the Fed continues to fight high inflation, some analysts have argued that structural forces are making the ideal inflation target higher than 2% in the post-pandemic economy. Factors out of the Fed’s control are making it particularly difficult this cycle to fully restore price stability without tipping the economy into a recession. Although the current regime has a relatively short history, financial markets would almost certainly question the Fed’s inflation-fighting credibility if they were to raise the target. In this episode, we talk with Chris Low, Chief Economist with FHN Financial, about the history behind the Fed’s 2% inflation target, the main arguments for and against raising it from 2%, and the potential economic ramifications from a higher target.
Congress passed the Community Reinvestment Act (CRA) nearly 50 years ago to encourage lending within financial institutions’ local communities. Since its passage, regulators have tried to modernize the CRA in order to keep up with broad changes in the financial system. Today, banks and bank examiners are preparing for possible reforms in the coming years that would significantly alter how they comply with the CRA. In this episode, we talk with Brian Waters, President and Co-Founder of FindCRA, about the history of CRA, its efficacy amidst a shifting financial landscape, and some proposed changes on the horizon.
Loans issued by the Small Business Administration are pooled into securities that are backed by the full faith and credit of the US government, have a quarterly adjusting feature, and have no floating rate cap. The SBA market is big and liquid enough to function smoothly through shocks like legislative risk and the 2023 regional banking crisis. In this episode, we talk with Matt Peterman and Ruben Rodriguez of FHN Financial about the structure of SBA 7(a) securities, how the SBA market functioned through the pandemic economy, and the securities’ strategic role in the current interest rate environment.
Recent research from the Congressional Budget Office suggests that an initial undercounting of undocumented migrants may help explain the surprisingly resilient US economy during the last two years. From a macroeconomic perspective, the future path of migration flows will significantly affect longer-term estimates of potential economic growth and public budget trajectories. In this episode, we talk with Julia Gelatt, Associate Director of the US Immigration Policy Program at the Migration Policy Institute, about the current state of US immigration, the most important drivers of US migration flows, the role of policy versus external factors, and the impacts of migration on the US economy and federal budget.
The Federal Home Loan Bank system started as a Great Depression-era effort to support homeownership across the United States. Ever since, it has transformed into a vital source of liquidity for its member banks in good times and bad. In this episode, we talk with James Hotchkiss, Senior Director of Strategies and Solutions at the Federal Home Loan Bank of Chicago, about the FHLB system’s history, how it serves its member banks, and its role in the US financial system.
The labor market is at the center of overall economic activity and how the Federal Reserve understands inflation. It can be difficult to gauge underlying trends for employment and compensation, however, when some data series appear to be telling different stories. In this episode, we talk with Preston Mui, Senior Economist at Employ America, about how to understand the most important labor market data, how the Fed views labor market tightness in its fight against high inflation, and the outlook for 2024.
The use of derivatives has evolved since the global financial crisis, giving banks opportunities to protect against the risks and uncertainty that stem from aggressive Fed tightening. Now that the Fed is poised to begin policy easing later this year, these tools can also help banks weather falling interest rates to support financial system stability. In this episode, we talk with Brian Matochik and Christian Turner, Senior Vice Presidents with the Derivative Products Group at FHN Financial, about the value of derivatives for banks in a wide range of market environments, how regulators view the use of derivatives, and how institutions of any size can benefit from their use.
Decades ago, the Basel Accords attempted to minimize global financial risk by standardizing regulations across major countries. The current phase of legislation, initially crafted after the global financial crisis and now dubbed the “Basel III endgame,” would impose new risk-weighted capital requirements on US banks and widen the net of financial regulation, potentially increasing costs for banks and customers in an attempt to elevate banking sector resiliency. In this episode, we talk with Greg Baer, President and Chief Executive Officer at the Bank Policy Institute, about Basel III’s key elements, the tradeoff between profitability and banking sector stability, and the road ahead for the proposed legislation.
The shift from rock-bottom interest rates early in the pandemic to mortgage rates eclipsing 8% has caused housing inventories to plummet and demand for new housing construction to increase. As the housing market reaches somewhat of a standstill from homeowners experiencing “mortgage lock,” rising house prices make first-time homeownership increasingly less affordable. While the housing market has so far weathered these changes without an industry-wide collapse, cyclical forces can always cause distress down the line. In this episode, we talk with Mark Palim, Vice President and Deputy Chief Economist with Fannie Mae, about how the housing market has adjusted to pandemic disruptions, the future for home sales and house prices, and the potential for any systemic risks.