Good Tuesday AM,

I am truly emotional about what is happening in Israel. I don’t want to get into any commentary about it and just pray that the fighting stops quickly.

We haven’t seen this for a while in the markets.

Bond yields are down about 30 basis points from the top last week and hovering at 4.63%. Not being a great (or even a good) chartist, from the way things are lining up this am, I would say that we have a really good chance of the 10yr getting down to 4.48%. It is not going to be a straight line. We do have a few school zones ahead which we need to slow down for (PPI tomorrow and CPI on Thursday) but assuming those come in tame as expected, we could see a continued rally. That said, floating into important data is never recommended. Tomorrow also brings some additional fed commentary (The FOMC minutes from the last meeting). With some better pricing today, tough not to recommend taking it and floating down on any additional improvement.

Interesting and quick commentary from Bloomberg…

Two charts stand out to me right now, in the wake of this weekend’s attack on Israel.

The first is rates. One could have easily imagined some kind of scenario, where the attack was perceived initially inflationary, both due to higher oil prices, as well as more defense spending, pushing yields even higher. And yet the first move is for noticeably lower yields. The yield on the 10-year is actually down 23 basis points from its Friday peak, immediately after the strong payrolls report.

Meanwhile, there’s been a ton of attention paid to oil. And crude did see a bounce in the immediate wake of the attack. But most people in the US experience oil through gasoline prices, and there things remain depressed. Gasoline futures are up a bit in the last couple of days, but remain very depressed, thanks to the collapse in refiner margins, canceling out the increase in crude.

Now granted, it’s hard to read much significance to a day’s worth of trading, and make some grand connection to geopolitical developments. But perhaps it speaks to how extreme the sentiment had been getting last week — particularly on the rate side — that the immediate move is lower, and for Treasuries to reclaim some of their flight-to-safety premium.

Please remain safe and healthy, make today great!