Good Monday AM,

Pre the opening, bonds looked like it was going to be an ugly day. Since then, they have clawed back (at least on the mortgage side) to be in the green (green is good). The treasury market is lagging today, which is never comfortable since the Treasury market is far larger and typically dictates what happens in mortgages, not the other way around.  From an emotional place, there was no fundamental reason for the drop this morning, but we are still under the spell of a hawkish Fed that cannot control inflation unless they push us into a recession. The Fed needs to push GDP down enough to stop spending and thereby put an end to inflation. The unintended consequences can be ugly. We may first experience food and gas shortages. The expectation is that we will not be able to call the recession for 12.5 months from now and there will be pain along the way. The positive spin with most recessions is that by the time the news confirms the recession, we are likely already coming out and feeling better overall. With this being the current playbook, I remain bullish on bonds as the yield curve is staying inverted (2 year/10 year bonds are now inverted by 3 bps with the maximum I can remember ever, being 5bps). I continue to believe staying locked is prudent.

Please remain safe and stay healthy.