As we end the week-a week in which we saw GDP for the 4th quarter come in a bit higher than anticipated, we see the 10 year treasury has steadily climbed to the 2.74% area.
The 10 year started the week in the 2.68% area and traded as low as 2.63% on Tuesday before moving sharply higher on Wednesday and then adding a bit more Thursday and again today.
This move is against a backdrop of continued mixed economic signals from all of the data. As I look at the data being released and the expectations I hear from the ‘smart’ people there aren’t many reasons to think the 10 year rate is going much higher. If I don’t see inflation it is hard to buy a case for higher rates right now. Of course this assumes that all the Global buyers of our treasury debt continue at a normalized pace–if they change their minds all bets are off.
Income securities are not really affected much with a 10 basis point rise in interest rates over the course of a week–if we did that daily for 3-4 days it would certainly make a difference–but for a week it isn’t a problem.
We do note that the FED balance sheet runoff for the week was just announced with another $7 billion in assets falling off the balance sheet. This follows last weeks massive $47 billion in runoff. Last week was the 1st week since 12/3/2013 that the Fed balance sheet fell below $4 trillion.