Good Monday AM,
Some commentary from Dan Rawitch this AM. He is setting expectations for higher rates in the short term. He writes in a quirky/funny way so I thought I would share. I am also including an interesting graph which shows despite all of the growth during the pandemic, the NY Fed Survey shows 1/3 of Americans feel they are much worse off financially now… This is not a good indicator.
The pain train is chugging forward with MBS now testing 100! This sell off has taken has down 340 bps since November and 430 bps since August and it continues to accelerate. There are still no signs we have found bottom. What I can tell you is that in my opinion this one of the largest over reactions I have seen in my history of studying the markets. Not so much where rates currently sit, perhaps this is where they ultimately belong. However, the rate of change makes no sense and the market is building in all sorts of worst case scenarios into the current yields. The market is behaving as if everything every hawkish fed member said during the last meeting will play out. I feel very strongly that if the FED does raise rates 3-4 times next year and they trim their balance sheets, we will be looking at a ten year yield in the .70-.80% percent range and an inverted yield curve. I have seen the Fed make this blunder in the past and I can see it coming again. Meanwhile, you much ride it out on the pain train and prepare for the ten year to test 2% in relatively short order. Hopefully we get a correction of some sort before this happens. I mean come on, 340 basis point sell off without any sort of bounce is well outside of normal.
Please remain safe and healthy, make today great.