Good Thursday AM,

Bonds made another strong showing yesterday as the 10-yr closed at 1.09 after being as high as 1.18% the day prior. We are not yet back to the .96 pivot but I do think we will get there. I was expecting some follow through buying today, that was at least until whispers of the new stimulus plan started to swirl. Initial estimates were for $1.3Trillion and now we are hearing numbers north of $2Trillion. Bonds had a hard time swallowing that last night and this a.m. up until the unemployment claims report came out and was dismal. On expectations of 795k new claims, the number came in a 965k. 965k new unemployment claims! We most certainly have an employment problem! The equity markets, who love the stimulus (for now), are up on the day, the bond market is flat (could be much worse). Any concerns the Fed will pull back on supporting the economy and allow rates to increase should be put to rest. There is some Fed speak today but the real reaction is likely to happen late in the day when President Elect Biden lays out his stimulus plan at 4pm Pacific.

I have mentioned several times over the past year how mortgage rates are, due to the volume of loans, not as low as they could or should be by historical measures. The spreads have been exceptionally wide. The positive spin on that though is as the 10-yr has jumped 50basis points since the summer, mortgage rates have not run up. The two charts below make the point (I like the last chart which shows how spreads are narrowing). Bottom line, spreads are narrowing but are still wider than normal, rates are going to say low.

A scary number: $1.6 trillion — The total federal student debt owed by some 43 million U.S. borrowers. Biden previously committed to forgiving $10,000 in student loans per borrower as part of a broader package.

Please remain safe and healthy, make today great.