Good Monday AM,

Finally, a full week. 

The ten-year is now testing 3.50% again. This is a clear checkpoint on the way down. What is not clear is whether we will get below it during this current rally. If we can, we will likely test the 3.28 level, a place we have not visited since September of last year. It is likely that we will bounce around the 3.5 level until we see the CPI numbers on the 12th. Those numbers have the power to take the ten-year down to 3.28, or up to 3.88% That is a big and scary range. Mortgage bonds are also testing a crucial level of resistance.

Two slides to share with another reason why I am bullish on rates.. not to get too deep into this subject but, with the Fed raising rates so precipitously in 2022, the debt service on Treasury’s (and really all debt, but for now just looking at Treasury’s since we get to pay for this) has gone from 28b to 200b. The Fed is watching this and knows they cannot keep putting this pressure on us and the system without cracking.

… and this is a great piece to share what expectations are for a Fed Funds rate this year.

The Fed says 5.25%, markets expect 4.6% and if something cracks (we are heading this way), the Fed will cut back to 2.00%. I don’t think we get that low, but I think we end up lower that current market expectations. We will see what Thursday’s CPI come in at.

Please remain safe and stay healthy, make today great!