Good Friday AM,
The bond rally still has legs. I see continued downward momentum on the ten-year bond which broke under 1.80% this am. Mortgage Bonds are still stuck at resistance for the 7th time. This is something to be aware of because if it does not break out soon, it will likely fall as much as 80bps. There is no news today, so bonds can do their thing without any technical interference. The next level to watch on the ten-year bond is 2.66%. We are currently sitting on a key support area of 2.79. 2.66% would be great as a rising tide lifts all boats and mortgage bonds and rates would go along for the ride, improving as well.
If you ask why, well…
The S&P 500 is down 20% from recent high (most retailers are stuck with inventory and the consumer is starting to sit on the sidelines, this will be bad for growth and GDP), on track to close in bear-market territory. Risk-off strategy (sell stocks, buy bonds) is the right call. To add to that point, Bloomberg shared, “US stocks are headed for a seventh successive week of declines, the longest losing streak since the bursting of the dotcom bubble, as traders fret the possibility of slowing earnings growth. Federal Reserve Bank of Kansas City President Esther George said “the rough week” in the markets wasn’t surprising and was “one of the avenues though which tighter financial conditions will emerge”.
Today may be a particularly stern test of the market — with a risk of further volatility — as Goldman Sachs Group Inc. estimates that $460 billion worth of derivatives across single stocks and $855 billion of S&P 500-linked contracts will expire.”
The odds for a recession continue to grow.
I do not see price deflation in the market, but I do see a slowing of gains. The positive spin is that it will allow inventory to creep up and with more homes available, there will likely be more transactions. On the flip side, as I shared yesterday, consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards, a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end. All part of the same economic cycle.
Thankfully, it feels like we are finally beyond the daily discussion of Covid. Just in time to start discussing Monkeypox (wtf). NYC is investigating a possible case of monkeypox as infections crop up in the US, Canada, Europe and Australia. #speechless
Please remain safe and healthy, enjoy the weekend and first, make today great!
