Reviewing the Perspective

Since coming from the highest prices in more than a decade in November, bonds have been running ahead of the end of the year. That resistance is in line with the 10yr yield in the 3.40-3.42 neighborhood. Although we saw a small amount earlier this week, it seems that we could not say that a definite crisis has occurred.

Part of the delay in long-term bonds can be attributed to a lack of clear commitment to expectations for short-term rates. In particular, the market is increasingly convinced that the Fed will keep rates high for a long time even though they do not see the Fed to be “more than 5%” as suggested by the many Fed speakers. The chart below of Fed Funds Futures for September shows how much of a combination of expectations is different from an outright change.

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There is nothing big on the calendar today, or the beginning of next week. Traders may have to hear from the Fed a week later before giving it an interval.

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