Good Thursday AM,

Yesterday’s Fed announcement was fairly dovish. Markets reacted orderly and rates improved a bit. As with many Fed meeting announcements, the deeper thinkers who carve up each word and punctuation were up late last night doing their thing. The outcome was that Mr. Powell’s comments about 1) Fed expectations for inflation to run at 2.5% this year and 2) the Fed allowing inflation to run hot for a while (until full employment is obtained) has sent sell signals on bonds across the world. The 10-yr is sitting at 1.74% this a.m. Mr. Powell had every opportunity to comment on the Fed’s bond purchase plans, which would allow markets to have a backstop, but he whiffed on the questions. He also whiffed on the question regarding the expiration of the capital reserve waiver which is going to be needed to stop some of the bleeding. If not, I believe we are heading for a 10-yr with a 2 handle. That is 4x the yield from last summer. You may want to read that line again. Additionally in yesterday’s Q&A session (after the policy announcement), Mr. Powell dodged an important questions about the 10-year yield and what he plans on doing about it. He never came close to answering the question and simply repeated that the FED remains committed to keeping monetary policies supportive. In essence his answer said nothing about the ten-year, it spoke only to the short term rates. UGH! Then, no mention about operation twist, or some form of yield control. He gave nothing just he did during his WSJ interview and now we are getting the same results. This could get much worse. PLAY DEFENSE.

Oh and unemployment claims out today were dismal. 770k new claims.. Still more than the worst we saw anytime during the recession. We are seeing this weekly for more than a year now. Reconcile that!

Please remain safe and healthy, make today great.