March 6, 2019
Rates at all maturities have been remarkably stable since the beginning of the year. With the economy showing some signs of weakness and inflation pressure nowhere to be found, the Fed decided to pause their somewhat aggressive move to higher rates. They got burned a bit when after the last rate increase in December the Dow dropped by over 2,000 points and volatility spiked. The ten year hit 3.24% about mid-November and sunk to 2.56% by January 3 before starting a slow increase to 2.72%. Most now predict few if any rate increases in 2019, unless the economy starts gaining some steam. Short term rates have been stable for the past 60 days with the 30 day money moving between 2.40-2.45% so far this year. The yield curve is basically flat with the spread between three month T-bills and 10 year Bonds at about 25 bps. It began 2018 at 102 bps and at the beginning of 2010 it was 377 bps (back in January 2010 three month rates were .08% and 10 year rates were 3.85%). The dollar was moving higher through last summer and into fall but has been moving mostly sideways since with a slight recent downward bias.
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