Good Morning on this fantastic Wednesday and best day of the week from your Hometown Lender (what a mouthful),

A little more data today in advance of tomorrow’s important PCE report. We also get Unemployment claims tomorrow, which always moves markets. The PCE though is this week’s main event. Today we have a final revision to Q4 GDP which came down .1. Bonds are hanging tough below the Fibonacci line (and line of support). We’ve been here roughly 10 times now and the market has not broken through. The range on the 10-yr is 4.15% – 4.30% (we are close to the top of that range). Tomorrow could be a breakout as the PCE is the Fed inflation gauge.

Once again, be cautions floating into a major news event.

It seems that bond traders no longer predict the Federal Reserve will cut interest rates by more than 75 basis points this year, with the view now finally in line with what the central bank itself has indicated as the likeliest outcome. That closes a gap that has been narrowing since the start of the year between what traders forecast for rate cuts this year and the pushback against those bets by central banks. That’s unraveling what was supposed to be the big bond trade of 2024 — the yield curve returning to a traditional upward slope. Meanwhile, the chief executive of Goldman Sachs said that softer consumer spending calls into question the view that the US economy will see a soft landing. David Solomon, speaking at a UBS conference, said that while the world is “set up for a soft landing,” he thinks the outlook is a “little bit more uncertain than that.”

Investors are growing increasingly sanguine about the U.S. economy, piling into stocks and bonds.

The extra yield that investors demand to hold investment-grade corporate debt over safer Treasurys is now hovering around some of the lowest levels since the 2008 financial crisis. Oddly, this has not been true for Mortgage Bonds which are still seeing outsized spreads from Treasuries.

Please remain safe and healthy, make today great!