Not for the Faint Hearted

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We are basically staring 2.62 dead in the face as we approach NFP.  What do you do?  Well, I’m never one to encourage floating during times like these, but if you haven’t locked by now I don’t see a ton of reason to lock here.  That said, you can’t chase losers, therefore if things go the wrong way tomorrow you should take your lumps.  

Here’s why I have a hard time accepting a 3% 10 year:

1.  We resisted it in Jan 2014 coming off 2 straight years of 2.2+% GDP yet we like it here at 1.6%?  On what, the hope things are better?  After a terrible Q4 and Xmas season?  I don’t see it.  

2.  The consumer isn’t booming right now, so the heat we’ve seen some recent inflation gauges isn’t sustainable if demand is tepid.

3.  Despite the Fed’s readiness to move, they have reiterated continually that they would rather overshoot.  Again, the data doesn’t warrant the 4 hikes some are starting to price in if the Fed is still resolute in maintaining a shallow glide path.

As it does with these things, the edges get very rough.  Everyone is pricing in worst case right now.  A lot has to happen to blow through the worst case scenario.  I will just reiterate what I have shared with some of you privately which is I’m more concerned about breaking these levels than I have in a long time, but I just can’t fit the puzzle pieces together to justify it.

It’s a tough call either way for sure.

-Philip Mancuso

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