The Fed kicked off its summer soiree in Jackson Hole today as investors wait to hear from Fed Chair Janet Yellen tomorrow. For the first time in years, the hawks within the FOMC revealed themselves in minutes from their July meeting released yesterday. Does that mean Yellen might drop in some hawkish talk of her own in tomorrow’s key note?
If so it would be a significant surprise says Jeff Kilburg of KKM Financial. “She’s been the queen of the doves - no doubt about it,” he says of Yellen. “We knew she was dovish coming in, she’s gonna be holding rates lower, longer, further. That’s kind of been the undercurrent.” Still, he admits, “It’s been a long time since the hawks have even been in the room,” and any hawkish language, no matter how small, is at the very least worth noting.
Getting clues from the 10-Year
The yield on the 10-year, which has crept higher this week, may shed a little bit of light on what investors are expecting when it comes to rates under Janet Yellen’s Fed. Kilburg cautions, “so many people got caught offsides at the beginning of the year - ‘3%, it’s going to 4%,’ everyone is now a 10-year specialist.”
With the yield at 2.43% this morning Kilburg says he expects them to go lower before they get higher, noting that there is plenty of interest around the globe in owning treasuries.
How about that dollar?
“As we walk away from these purchases - the end of September, that’s when we’re officially done buying everything like the Fed has done...I think it’s as simplistic as that. The dollar has been suppressed for quite some time,” Kilburg says.
He says that all you need to know about the greenback is the fact that in the last week it has surged to 11-month highs. He likes it to head even higher.