EDITOR NOTE: Here’s a picture of what’s going on in the bond market. As you can see, with the “threat” of a Blue Wave subsiding, so too has volatility in short-term Treasuries. Although we await Jerome Powell’s speech today, we already know what he’s going to say. More fiscal support is needed, and that a resurgence in sky-high COVID cases will likely create further disruptions--perhaps even a second lockdown, plunging the US economy deeper into negativity. More fear, more uncertainty, more spending, more debt. Were you expecting anything different?
(Bloomberg) — Fed Chair Jerome Powell will likely avoid discussing election results at Thursday’s FOMC press conference and instead stress the urgency for further fiscal support while remaining neutral on what shape and form it should take. We expect the resurgence in virus cases, and its potential impact on the economic outlook, to take center stage in the central bank’s communication.
Code for further government shutdowns.
The reaction in the bond markets? The 10Y Treasury yield declined 12.5 basis points.
And the 10Y-3M yield curve slope dropped as well.
Short-term Treasury volatility crashed as the Blue Wave fantasy failed to materialize.