Where's The Recession?
Retail sales come in very strong for January. Worries about an imminent recession now get pushed back. Are 2-year yields heading to 5%?
Dear readers,
The first US Treasury instrument to cross above 5% in yield was the 6-month bill. That means, on a short-term basis, the risk-free rate, and the hurdle for all other investments, is now above 5%. And with the recent violation of the key 4.52% area on 2s that we flagged last week, 5% 2-year yields are now entirely possible and almost likely given the recent economic data and Fed rhetoric. Shouldn’t this be causing stocks to crash? It isn’t, and therefore we must parse through all that is happening in the economy and markets to understand if we are indeed entering a new correlation regime that differs from last year’s “yields up, stocks down” dynamic.
