Good Tuesday AM,

The 10-yr Treasury year is settling down for the moment. The yield at 1.59% is not inspiring for mortgage rates, which are selling a bit right now. There is a 10-yr Treasury auction in about 10 minutes so that may have an impact. Basically, bond markets are very oversold. Oversold in both the long and short positions. There will be some buyers that step back in, but not likely until a firm bottom is in place. We do not know whether we are there yet. We may have a better idea after the auction. The charts have the 10-yr at the Fibonacci 61.8 level… yes, this is technical crap but it is also accurate. Don’t fight the tape. If we break through that level, we will be looking squarely at a 100% retracement which pushes the 10-yr back to 1.80%. and rates up another .25%. That is no bueno and why the auction and each basis point is important ground. Markets will capitulate (as they have done to get to this level) should the 10-yr break over 1.63%. At this point the odds point that direction. The one thing that can help us are tomorrow’s inflation numbers. Maybe we get a nice cool reading!

Today the news was bond friendly, with the Small Business Optimism index falling and the JOLTS job opening report falling considerably. The jobs number is bad for the economy because the amount of jobs open did not fall because a lot of new jobs were created last month, quite the opposite. The Non Farm Payroll number was terrible. This means the amount of open jobs fell because employers need less people than they did last month. Combine this with a decline in business optimism and you get further evidence of a frail economy. For now, although bonds are having a good morning, I am not confident that we have yet to find bottom. We need a good inflation number tomorrow.

This was interesting from the WSJ today. Fewer cars, but prices are up a ridiculous amount. The notes say prices are up 17% but it chart looks closer to 40%

In the U.S., auto makers are compensating for sliding car sales with higher prices. U.S. auto and light truck sales in September fell to their lowest for over a decade excluding the shutdown-affected months of spring 2020. U.S. consumers, meanwhile, paid an average of $42,368 for new vehicles in September, up 17% from the same month last year, according to a preliminary estimate by data provider J.D. Power. Production constraints are leading car makers to prioritize higher-margin vehicles.

Please remain safe and healthy, make today great.