Good Friday AM,

Bonds are having a great day.

The 10yr is down to 4.22% and mortgage bonds are +36bps. Why? Well yes, more data today shows slowing economic activity but that is not the real catalyst. The real help came from Fed Chairman Powell during his speech today at Spellman college. The commentary started off a bit hawkish but then turned dovish which markets are running with. Below is a short recap of Mr. Powell’s remarks. At 4.22% on the 10yr, we sit on a Fibonacci line. If we can break through it (and it looks like we will), the 10yr should trade down into the low teens. We are trading well above the 200-day moving average now which is normally not sustainable. That said, for rates to improve, we will need to spend some time in this high altitude.

Markets moved higher following Powell’s remarks, with major averages positive on Wall Street and Treasury yields sharply lower.

“Markets view today’s comments as inching toward the dovish camp,” said Jeffrey Roach, chief economist at LPL Financial.

Market pricing Friday morning indicated that the Fed indeed is done hiking and could start cutting as soon as March 2024, according to the CME Group. Moreover, futures are pointing to cuts totaling 1.25 percentage points by the end of the year, the equivalent of five quarter percentage point reductions.

However, neither Powell nor any of his fellow officials have provided any indication that they’re thinking about cuts, with the chair adhering to data dependence for future decisions rather than any preset course.

“We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks,” Powell said.

Addressing the economic data, Powell characterized the labor market as “very strong,” through he said a reduced pace of job creation is helping bring supply and demand back in line.

Please remain safe and healthy, enjoy the weekend and first, make today great.