Making Sense

“There’s a big difference between probability and outcome. Probable things fail to happen—and improbable things happen—all the time.” That’s one of the most important things you can know about investment risk.” ~ Howard Marks With Fed Chair's Front and Center focus on evolving outlook of the US employment situation , this week carried extra significance and the Employment data catalyzed the move in Yields. Yields on US2s fell 35 bps (High - Low Range) and on US10s 28 bps (High - Low Range) over the week . On US2s Yields, we closed right at 3.65% and on US10s at 3.71% which is in close proximity to the braking point we mentioned earlier in the backdrop of the larger H&S Formation. We did not get the upticks towards the 4.10% handle we were hoping for. Another Trade I had thought about and did not write was the break below the 3.90% - 4.10% consolidation range but that's because consolidation break outs many times chop you out so better to trade at the top of the consolidatio...

Fed Fund Futures implied interest rate pricing closed the week at 32 bps of rate cuts priced into from 43 bps cuts seen at the start of the week. Also making the headline was Goldman Sachs changing it's Fed cut call to September. The street is now divided for the first rate cut between September and December policy meetings. I still think there is more legroom before we start thinking if the FFR pricing is rich . The Us2s10s Curve bear flattened 7.40 bps.  Governor Waller's speech "Some Thoughts on r*" is an interesting one and a recommend reading as he looks at factors affecting  r* from the lens of supply and demand and contributing factors that led to the decline of r*. He then goes on to delve into factors that could have reversed to explain if r* has moved higher in the current environment.  S&P Flash PMIs showed US Global Composite PMI at a 25 month high and Services PMI at 12 month high while the Mfg PMI showed an overall improvement in business conditions....