Sometimes 6bps of Weakness is Just 6bps of Weakness
There’s a tendency, among bond watching loan originators, to focus a bit too much on whatever is happening on the present day in the bond market. Higher rates today? “Oh no… It’s bad. Why is it bad? Why can’t we catch a break? Oh well, looks like good times are over!” Lower rates today? “Whoo hoo! Mortimer, we’re back! OMG, I am going to have so many clients calling to get a lower rate. How long till we’re back in the 3s?” But the reality is nowhere near either of these extremes. Sometimes a 6bp sell-off in 10yr yields is just a 6bp sell-off. A modest amount of weakness makes solid sense here. Yesterday’s auction was a bit weaker than the previous day’s 3yr auction. So today’s 30yr auction could continue that trend of shunning duration. An hour later, we’ll hear from Powell in a bit of a wild card appearance. We know Powell will have unscripted comments as he’s on a panel discussing monetary policy in a global environment, but it remains to be seen how focused any of the comments are on recent domestic policy decisions. The path of least resistance for any Fed chair on the week after a policy announcement that subsequently saw a 50bp rate rally is to say something to push back on that rally.