The 10Y broke back into the channel it broke out of several weeks ago, primarily on the enthusiasm around the treasury secretary designate – a hedge fund manager – will keep the plates spinning for another 4 years.

Whether or not he will is another matter. But, for now, the algos believe it and the 10Y is back below 4.3% and VIX has extended its plunge to 22% in the past three sessions – sending futures soaring.

continued for members…

As for the fundamentals, I don’t really see it.  Consider the move implied by the USD’s decline – as if yields will really collapse under a more dovish fiscal policy. The opposite is likely… …unless, as we’ve said for the past year, oil and gas prices collapse. That’s a big ask for OPEC.

As we enter the past couple of months of the year, we have to acknowledge that a year-end meltup is the norm. It often occurs despite any bearish fundamentals.

In this case, it’s not hard to imagine that a hedge fund manager will focus on supporting equity values – one of the metrics that matters most to Trump. To the extent that Bessen can influence policy, he will. But the Fed holds the keys to interest rates as they relate to inflation.

And, Trump’s policies – again, with the exception of encouraging more domestic oil production – will surely be inflationary. The idea that DOGE will slash a trillion or more from the federal deficit is delusional – especially if tax cuts for corporations and wealthy individuals kick in.

The most that they can hope for is that lower corporate taxes – if enacted – will allow public companies to operate more profitably, which is obviously bullish and sets up an interesting tug of war between the equity market and interest rates.

Perhaps that’s why the 2s10s has reinverted.

Just a quick reminder, I will be out the the next day or two. I expect to be able to post Friday, though it’ll be a pretty quiet day.

I wish everyone a wonderful Thanksgiving holiday!