The Weekly Report

  • ​Treasuries do not yet offer any safe spaces to short the bond market. After such a large reduction in yields on Thursday — 10-yr UST down 12bp from low levels last Friday — everyone was looking for at least a small rebound in rates. But, prices held despite lows of the last three months. A typical pattern would be for month-end prices to fade in the first week of the new month, but nothing feels “typical” this summer. A good play would be to look for Fed speakers to push back against implied pricing of a Fed ease in early 2023, perhaps by mid-August if that view still holds through next week. If so, the 2s/5s curve could invert even more.
  • The first article details the week’s major events and their impact on the curve. It concludes with updates to yield ranges through next week, then a preview of the major data releases in the first half of the month.
  • Next, we take a step back to analyze how eight different influences impact yields across the curve. In the swirl of 2022, we weight each one — a shortcut to understanding rapid and sometimes obscure changes in direction. The piece incorporates 10-yr correlations and updates from 2022.
  • When the Fed and government officials highlight the strength of household balance sheets and spending, they focus on nominal dollars. It is past time to start inflation adjusting these numbers. For the accumulated cash hoard, for example, the purchasing power is $3 trillion less than the widely quoted numbers. The charts tell the story, and the conclusion raises questions about the dangers of assuming inflation wouldn’t hurt the economy if the Fed didn’t tighten policy to choke it off.
  • Current bids: 10s at 2.620%, 5s at 2.674%, and 30s at 2.956%.
  • The Weekly Report will not publish next Friday.

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