Good Tuesday AM,

Early January is not typically kind to bonds or interest rates (regardless of data) and this year is starting out no differently. UGH! Bonds are just horrible again this morning. The news that was released this morning was bond friendly but the market is more focused on recent forecasts that the latest Omicron variant will peak in January in the US and not do as much damage to the economy as originally feared. Rates have risen so fast it has caused a bifurcation in the stock market with tech and growth stocks getting hammered and value stocks seeing the benefit. The ten-year treasury is now at 1.67. We are destined to retest 1.70% and only then will we know if that is the top and if we will see relief from there, as we have the previous times we hit that level. Mortgage bonds are now below the last line of defense and the next support level is 60 plus bps lower. While it is possible there is some support further back, or that we can invent a new level of support, we should prepare for the worst until we can some signal otherwise. The good news is that parabolic rises like this are followed by big corrections; patience is a virtue.

Please remain safe and healthy, make today great.