Good Thursday AM,

Markets (both stocks and bonds) are mostly flat as things start to wind down heading into the holiday weekend despite some weak unemployment claim numbers. Almost 800k new filings. Yes we can certainly see volatility between now and then, but three-day weekends easily turn into four-day weekends for many (of course, not me).  Matt Graham shared a pretty good recap today that I am including below which says mostly the same thing. We’ll have more direction on rates next week.

For the most part, this week has been “so far, so good” through Wednesday.  Yields have pushed back nicely after topping out at the highest levels in almost a year on Monday.  Such moves can either be a simple profit-taking measure for traders betting on higher rates or a bona fide reversal in a rising rate trend.  We’re hoping for the latter, at least when it concerns the short-term trend that carried 10yr yields from 1.0% to 1.19% in the past 2 weeks. 

The days leading up to a 3-day weekend can be a poor reflection of prevailing bond market sentiment.  Trading is already getting quiet with Asian markets closed for Lunar New Year and very little by way of econ data on the domestic calendar. 

Long story short, we may now be waiting on next week to confirm this week’s friendly bounce in rates.  If 10-yr yields can trade below 1.125% in any convincing way before then, that would be a promising development.  Breaking much above 1.17% would send the opposite message.

I am the first to admit that I do not understand bitcoin however, it is clear that lots of other do. Cryptocurrency is becoming a legitimate asset class. The Bank of New York Mellon said Thursday it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. On Wednesday, Mastercard said it is preparing to support cryptocurrencies directly on its network this year, and Twitter said it has studied using bitcoin to pay employees or vendors.

Please remain safe and healthy, make today great.