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.