Good Thursday AM,

Minimal data today.

Unemployment claims came in as expected. There was a Treasury auction that went well. Bond yields have been leaking a bit higher, but we are talking less than 10 basis points and we have not broken through the line of support support in the current trading channel. Mortgage rates are slightly worse. Tomorrow there is no economic data to be released and next week has busy days on Tuesday and Thursday with a lot of inflation and growth news. That is where we will see the next batch of volatility although I don’t think we have much risk of rates getting appreciably worse with the Fed saying no more hikes. The worst case scenario (which I think is more realistic) is that we stay in this range for a few months.

Yesterday’s auction also had strong investor demand despite the auction’s large size.

There was a record $42B of 10-year notes sold at lower-than-expected yields than the past six auctions. Bigger picture: Despite Fed Chair Jay Powell ruling out a rate cut in March, it’s clearly the end of a rate-hiking cycle, unless some incoming economic data throws a curveball at the central bank. Traders continue to celebrate that, especially if holding off on policy easing guarantees a significantly softer landing for the U.S. economy.

And just to balance the news…

Investors are convinced that interest rates are coming down later this year. Their record on these things, however, isn’t great. For nearly a decade after the 2008-09 financial crisis, for example, investors repeatedly (and wrongly) bet that rates would soon return to precrisis levels, according to an analysis by Bespoke Investment Group. More recently, Wall Street didn’t expect the Fed to take rates to near 5.5%, or that it would hold them there for so long. Now traders keep ramping up bets that rate cuts are just months away, only to see that day recede with each batch of strong economic data.

Like I said, I think we are here for a little bit more.

Please stay safe, healthy, and make today great!