The Calm Before the (Potential) Storm

Tomorrow with the release of the CPI at 8:30 am CST we could see a breakout of the 10 year treasury yield. To us a breakout will be a close for the day above 2.90% and of course only a stones throw from the 3% mark.

The expected range on the CPI is 1.9% to 2.3% and we can expect this breakout to occur if the reported rate is above the top end of consensus.

Investors need to once again be positioned correctly–we know we sound like a broken record.  “Correctly” means understanding the loss of capital that comes with higher rates and perpetual securities.

Of course if investors want to change positioning there are just 35 minutes left to do it prior to the CPI release.

On the other hand maybe the number tomorrow will be soft in which case the 10 year treasury will temporarily fall back to the 2.80% level.

3 thoughts on “The Calm Before the (Potential) Storm”

  1. Sold 400 shares of ABR-B with 2 minutes left on the trading clock, and with a profit of about $14. I’ve been planning to collect the dividend (it goes ex-div tomorrow) but I reasoned that 1) if we get an interest rate “shock” tomorrow then I can buy the shares back significantly cheaper over the next week or so, and 2) if there is no interest rate breakout of the 10 yr yield tomorrow then I can still buy them back at my sell price minus the div amount, so all I would be out of are commissions. Sounds too simple – what am I missing?

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