Good Wednesday AM from your Hometown Lender on this best day of the week,

There is no data today but there is a 10-yr Treasury auction (I believe the biggest one ever) which will create some volatility because it is the only tangible event today. As of now, bonds are holding firm from yesterday while equities continue to move higher. There is some more Fedspeak today, but markets don’t seem to care. Despite the Fed members message that cuts are coming but not yet, markets are turning a deaf ear. The question is will the markets take the bait now for a potential payoff later in the year when rates do get cut? It is great to be early to the party to be the first in line for the shrimp but not so early that you’re there to help the caterer set up. It is interesting that despite the Fed expectations of a pause for months before they cut rates, Yesterday there was a 15% probability of a March cut. Today almost 25% chance. Yesterday a 60% probability of a May cut. Today that is up to almost 70%.I would not bet against the Fed so my thought is that if yields drop, see that as an opportunity to lock as they will likely head back up a bit. We will be in a seesaw for some time. I do think for now, the high we will see on the 10yr is likely 4.18%

A little deeper dive into last week’s jobs data from Dr. Elliott Eisenberg:

“Despite job growth of 353,000, the January employment report contained troubling data. Ignoring weather-related phenomena including the length of the workweek, which shrank, hourly earnings, that jumped, and personal income, which was flat, the data is showing a troubling rise in part-time employment growth and reduced full-time work. Moreover, the broadest measure of unemployment rose to 7.2%, the highest level since 12/21, and manufacturing overtime hours sank. Mildly unnerving.”

Moving on to commercial real estate woes…

Treasury Secretary Janet Yellen said the losses being seen in US commercial real estate, one of the issues impacting NYCB, are a concern but that regulators are on the case. She said higher interest rates, increased vacancies due to a shift in working patterns and the maturing of a wave of real estate loans this year are “going to put a lot of stress on the owners of these properties.” The worries have continued to spread internationally, with Germany’s Deutsche Pfandbriefbank’s bonds slumping after an analyst highlighted concerns about its US commercial real estate exposure.

And last and potentially most importantly, credit card debt has become a bigger issue as consumers face higher interest rates. Delinquencies spiked more than 50% last year, the New York Federal Reserve said Tuesday. The development came as overall consumer debt rose to $17.5 trillion. Delinquencies are rising not only for credit cards, but also for mortgages and auto loans. “This signals increased financial stress, especially among younger and lower-income households.”