Good Thursday AM,

As expected bonds are doing well today. The good news is that we got a good bounce from the bottom of the range on Monday and Tuesday and now we are working our way toward the top. As a word of caution, mortgage bonds are within just a few bps of the high end of the range so be careful here. There is not currently enough velocity to break through, and if not, we will likely find our way back to the bottom of the channel. The news was mixed and is likely not hurting or helping. It seems the technicals are moving us at this point. Yesterday the FED minutes spooked the stock market. The minutes were as expected. Wait and see before making any reductions in bond purchases (tapering). The bond market is acting appropriately. Today the stock market has bounced back, which seems to have become a habit. We seem to have at most 2 days of selling and then the rally continues. This is nuts. At least bonds have been somewhat predictable.

The bottom line for now is we’re now in a period of indecision, waiting for clarity from Powell next week and Covid in general. The center of the range for the 10-yr is 1.25% (at  1.24% today) until further notice (incidentally, the mid-point of the recent ceiling/floor bounces). 

Please remain safe and healthy, make today great.