Good Monday AM on this shortened Thanksgiving Week,

Stocks are up a bit and Bonds are slightly down on the day. The 10-yr is at .85% and mortgage bonds are underperforming treasuries for now the second day in a row. We did push up against resistance last week and got the Heisman right in the face. When rejected at the top of the range it creates a high probability that we will work our way down to the bottom which is about 30bps worse in price from here. It is a fairly big news week (although not many top tier reports) and on top of a light trading week with the holiday, we could see some very wild swings. If you don’t lock today, don’t be surprised if you decide to wait until next week.

One of my favorite parts of a little financial analysis is trying to figure out what the markets are telling us. I am including a few graphs courtesy of Matt Graham below. The first is a shorter timeframe of the 10-yr trading activity, the second is a longer view. Which do you think better represents the path of the 10-yr going forward? The one comment (from Matt Graham) to add is that given the current pace of Covid case counts and increasing lock-downs, the most recent trend would be hard-pressed to continue unabated into 2021, but if economic data holds up and case counts level-off, anything is possible.

Let me know your thoughts.

Please remain safe and healthy, make today great!