Good Morning
Markets are better in both stocks and bonds as we start trading on the last full day of the year...Equity trading is light but bond trading has been more active after a reasonable sell off yesterday...30 year treasuries broke above both their 50 and 100 day moving averages yesterday and are still above the 100 day of 1.9392, but came no where near the 200 day moving average of 2.06. The 10 year however broke above all of their 50/100/200 day averages yesterday and remains right at its 50 day... What does it mean?... Bonds are going higher in yield next year... Maybe not next week, but economic numbers, inflation, a huge increase of tapering on January 15, rate rises, and balance sheet reductions... Are all in the cards for 2022..
We get the last of economic numbers this morning with first the claims numbers and then the Chicago PMI... None will change the momentum flow as we window dress into year end... S+P futures are up 7 while both the Nasdaq and Dow are up modestly... We doubt we see a significant back up in rates given treasury year end window dressing and index adjustment... According to BB the treasury index will return a negative 2% for this year... And remember that is a nominal negative return , inflation adjusted or real related, it is much more negative... BB Intelligence , predicts a similar return for 2022... Clearly the odds are stacked against all but HY bonds...but anything can happen with Covid uncertainty...
Tomorrow rates markets close at either 2 or 2.30...either way we expect little trading....and yes we did see the Guardian article that the US should establish price controls..we could give a 1000 reasons why that will not work, but it is out there... We are around all day and actually expect to be busy.
As the year draws to a close, investors are wondering on the implications of Covid and its multiple variants, decreasing stimulus and seriously high inflation numbers stoked by never ending supply chain bottlenecks. Key questions is how high will treasury yields soar to...as they are so ridiculously priced to many metrics given the manipulation of central banks for the last decade or more... And how much is left in the equity bull market... Do not expect the answers from us tomorrow...