Good Monday AM,

Bonds just continuing to struggle, and we need to continue to play defense.

The 10-yr note is now at 3.72, we came through the first Fibonacci level of 3.57 and then we came right through the second of 3.67 and on to the next stop of 3.77. Bonds are just not happy. If you look at Mortgage Bonds, it’s kind of the same story, they gave up. It is likely going to take Friday’s news, which is personal income, personal spending to help stop the selling. The debt ceiling issue is still looming. It is interesting because on one hand, it causes a flight to safety where people don’t want to be in equities while this is going on and on the other hand, if we default, our credit rating goes down and our debt becomes worth much less.

So there’s the dilemma.

With that, President Biden and House Speaker Kevin McCarthy agreed to meet Monday afternoon in a last-ditch effort to reach a deal to avoid a default on U.S. debt after negotiations to raise the federal borrowing limit reached an impasse. Talks between White House and House Republican negotiators largely ground to a halt this weekend, with both sides blaming the other for a failure to bridge their differences over spending levels. Federal Reserve Chair Jerome Powell suggested he was open to holding interest rates steady at the central bank’s meeting next month, saying that the current banking stress could mean rates may not need to rise as high as otherwise to slow the economy.

Not much going on this week but the calendar is below.

Tuesday
The Commerce Department releases new-home sales data for April. Economists expect a seasonally adjusted annual rate of 665,000 new single-family homes sold, down 2.6% from March.

Wednesday
The Federal Open Market Committee releases the minutes from its early-May monetary-policy meeting.

Thursday
The Commerce Department releases its second estimate of first-quarter gross-domestic-product growth. The consensus call is for a seasonally adjusted annual growth rate of 1.1%, unchanged from the first estimate released in April.

Friday
The Commerce Department reports personal income and expenditures for April. Economists forecast both income and spending increases of 0.4%, month over month. This compares with a gain of 0.3% and a flat reading, respectively, in March. The core personal-consumption expenditures price index is seen rising 4.6% year over year, the same as March’s reading.

The Commerce Department releases the durable-goods report for April. New orders for durable manufactured goods are expected to be down 0.9% from March.

Interesting what is happening in commercial real estate.

Markets have It right that the biggest issues will be with the landlords who have the debt and no revenue to offset it. A few to mention, SL Green’s share price closed at $22.54 on Friday—barely above the New York office firm’s 1997 initial-public-offering price and a fraction of its post-global-financial-crisis peak of more than $140 in 2015. Vornado Realty Trust, which owns marquee office buildings in San Francisco, Chicago and New York, closed at $13.13 a share on Friday; it had hit $67 as recently as 2020. At the end of April, office REITs were the most-shorted REIT sector, with average short interest at 6.4% of shares outstanding, up 0.28 percentage point from March, according to S&P Global Market Intelligence.

Please remain safe and stay healthy, make today great!