UST Quarterly Refunding Announcement: no change in 3s, 10s, 30s “Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.”

The U.S. labor force participation rate for prime-age workers (those 25-54) dropped sharply in June. While sudden, it brought the rate back to 2023-25 levels. Coming jobs reports, starting with the July numbers out this Friday, may signal whether the rate will stabilize or decline further

The chart below starts on Sept 18, 2024, the FOMC meeting at which they kicked off the rate-cutting cycle with a 50 bps move. 30-yr yields went straight up (I would argue in response to that cut) and, on May 19, 2026, hit a 19-year high of 5.18%. I continue to argue that the problem is that the Fed has not been taking the inflation "problem" seriously, and that the bond market has been rejecting its easy policy. So, a surprise hike might "fix" the bond market rather than worsen it. The Wall Street adage "bond investors can stop panicking when the Fed starts panicking" applies. A little Fed-driven panic about inflation might calm bond investors. Holding steady and the yield uptrend below will just continue until they do "choose" (Warsh's word) to deal with inflation.

Some highlights from Fed Chairman Kevin Warsh's second press conference: He flags the intermeeting move in real and nominal yields (materially higher, top-decile intermeeting move), frames it as the reduction in forward guidance working as designed: "We haven't done much in 42 days. The markets have done quite a bit." One way to read this is to see the chairman treating market-delivered tightening as a substitute for policy action (for now) as the Fed awaits additional data on inflation trends.

Conference Board's labor differential moved down to 3.1 in July ... in the history of this index, it has never gone negative without the economy going into (or already being in) a recession

Real Yields operate with cycles or regimes. During the "money printing" era from 2009 to 2022 (red), the 10-year real yield averaged just 0.23%. We are not in a zero-yield, money-printing era anymore (thank god). Before this (left blue), the 10-year real yield averaged 2.74%. I have argued the current period (right blue) should look like the pre-money-printing era (left blue), and it does. It also means 10-year real yields can go much higher before they become too restrictive (probably above 3%). What would cause 10-year real yields to go higher? Sticky inflation (we have now) and a Fed that does not "choose" (as Warsh terms it) to act on it. @Marcomadness2

US dollar - $DXY Seems ready for that move to 104-106 now, unless they stop the war escalation. Would look for what holds best if that happens. Also, I wonder how equities would react to such a move.