Good Wednesday AM: the best day of the week,
Bonds in the green again (although they seem to be fading a bit for the moment).
The 10-yr down below 4.60 which is encouraging but the volatility is off the charts. In the last 30 days we have run through a 70bp increase and then a 30bps decrease. Still higher than where we want to be, but for the moment, the market is tilting in our direction. If you look at the news today, you would not expect to see a pullback in rates. PPI, which the market was looking for .3, got .5. Now that is better than the .7 for last month. So, there is that silver lining that the market’s focusing on right now. And the core PPI, we were looking for .2 and we got .3. So that’s a miss (not a huge miss).
Later today we have the Fed minutes.
Be careful, because you pick up things in these minutes, especially at this point in the market, where what the Fed says behind closed doors is a lot more important than what is said during a speech. Tomorrow, we get CPI. Now the fact that we breezed right through the PPI leads me to believe that this rally could have some legs and we could get right through the CPI number as well. There’s no guarantee, and I am not a fan of floating through these big news days, but today was very interesting the fact that we did weather this miss maybe means it could happen again tomorrow.
Markets are pulling back on expectation of future hikes.
The 10-year Treasury is at 4.60% on today, up from 4.346% on Sept. 20, the day of the Fed’s last meeting, and 3.850% on July 26, the day of the last Fed rate increase. Higher borrowing costs slow economic activity by curtailing investment and spending. The upshot: If the run-up in the 10-year Treasury yields to their highest levels since 2007 persists, those increases could substitute for additional rises in the Fed-Funds rate.
Tomorrow will bring some more news with CPI and dissection of the Fed meeting minutes…
Please remain safe and healthy, make today great!