Goldilocks Stays in the House

As our reader GW pointed out the 10 years treasury has been heading lower today and is now around 2.80%.

The inflation numbers yesterday and today showed prices pretty much under control–as expected.

Retail sales were weak coming in a full .4% under forecast.

At this moment the DJIA is dropping kind of sharply at this time sparking a mini-flight to safety in bonds by the nervous nellies out there.

We are still of the mind that the Fed balance sheet runoff currently at 20 billion month and slated to go to 30 billion a month in April has a floor under the 10 year treasury. The floor has been 2.80% and it will be interesting to see where it ends the day.

While we are on record of a 3.25% 10 year by year end could we be TOO HIGH? Our forecast is one of the lowest out there and is based almost entirely on Fed run off–not on an overheating economy.

The short end of interest rates will continue to move higher as the Fed hikes those rates–and if this 10 year continues flat or even lower the market is telling us we need to be on the lookout ahead for a potentially softer economy–i.e. recession.

7 thoughts on “Goldilocks Stays in the House”

  1. Oh nooooo! Not the “R” word!

    Was disappointed to see this today over on Reuters:

    “The Commerce Department said retail sales slipped 0.1 percent last month. January data was revised to show sales dipping 0.1 percent instead of falling 0.3 percent as previously reported. It was the first time since April 2012 that retail sales have declined for three straight months.”

    1. GW–I have never gotten the feeling (technical term) that the economy is booming–doing ok yes–booming no. Certainly in urban areas things seem to be bustling more than out in the countryside where I am at. I drove through Minneapolis yesterday (which I avoid like the plague) and could hardly believe the amount of new construction high end condos along the Mississippi.

      Out in farm country the ag income (or lack there of) is no doubt hurting small town midwest America.

      1. I would agree with the difference in “bustling” between the city and the countryside/farm land. I have residences in both chicken-house country and Baltimore, MD. Lots of construction in the city, same old same old in the homeland.

        I think part of this is the changes we see in society. The youngin’s want to be near the bright lights and rental apartments. Otherwise, they’re forced to “adult” and buy a house and raise a family “the old way”.

        I tried to be so serious when I said all of that but it seems like some pun is in there.

        It’s entirely possible that while some will see changes in their paychecks now, folks like me and many small business-folks won’t realize a lot of change until tax time next year.

  2. Hi Greg–will head over and check it out-maybe it will bring clarity to this old person.

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