Good Wednesday AM on this best day of the week,

Bonds finally grabbed a foothold yesterday after the 10-yr Treasury auction was met with strong demand. Basically, the bleeding stopped. The patient lost a leg and an arm during the last week, but those may grow back over time. The 10-yr ran up to 1.18% and today is back to 1.09% today after having been below 0.95% just at the beginning of last week. Yes, the prospect of $3Trillion in stimulus is daunting and can easily be interpreted as initially inflationary and cause the knee jerk reaction we saw, but in truth, that spending will be deflationary and cause rates to drop, not rise (Think of it as if you were borrowing money. You have to pay it back so it reduces the amount left for you to spend on other things, same concept, just more zeroes). On top of this, the Fed has committed and reiterated that commitment to keep rates low. I know the last week has been painful, but it is I think a small break from the lower rate environment we will continue to enjoy. Even if the above were not beneficial, there is $18Trillion of bonds across the world that have a negative yield (below zero, you have to pay to buy the bond), that will by itself, keep US rates low. Mortgage bonds are better by about 50bps from their worst levels of yesterday. I am not sure the bleeding is over but for now, there is at least a tourniquet on the patient. Be patient, rates will improve.

The pandemic related mass migration continues: Redfin shared that slightly more than one-third of respondents of a new survey (34%) shared they have relocated during the pandemic. Moving away from high cost areas is a smart idea.

Which then brings us to the next point, where is the inventory? The little teal line in the bottom right below is driving the rest of the picture. 1.2months of inventory which is essentially… NONE.  This is our ceiling.

Please remain safe and healthy, make today great!