Did you feel that?
We felt a major shift in sentiment this week in markets. A stunning move.
Congrats to us all. In what has certainly been the most active week in rates coverage since the Spring’s regional banking crisis, the takeaways are bullish Treasuries and bearish on the economy. Risk, however, becomes more difficult to assess, as the stage in which we find ourselves has transitioned from “tightening” to “awaiting easing.” Did you feel it?
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We could easily write this post citing the Treasury’s new borrowing plans, an ISM disaster, Jerome Powell’s press conference, or today’s weak NFP. But we will have plenty more opportunity to analyze. Today, instead, we purely take a price lens. After all, price is truth. Why deny its place in our rotation just because we had a Super Bowl week of economic and market data?
Yes, we really are starting with T-bills. The reasons are twofold. First, The Bitcoin Layer is rooted in rates study, which itself is rooted in money markets. As former money markets practitioners, we can’t help but anchor ourselves in the money markets to begin the price study. If bill yields are simply an expression of the policy rate in market form, we must take a look at the micro. What is clear to us, although difficult to see with the naked eye, is the 3-month part of the curve is topping out as we speak. Only hindsight is 20/20, but zooming in shows you that T-bill yields declined this week, something that hasn’t happened much in the past few months: