LOW RATES — WE THINK WE WILL STAY A SPELL
The grinding move to lower yields has accelerated over the past week. We have pushed though recent resistance levels on the 10-year and will need to see how the range re-establishes itself at these lower levels. Unlike recent moves, we have not had as dramatic of a flattening move, although a bull steepener is almost a slap in the face if one expected higher rates. The move to lower yields has come in the face of continued signs of a spring thaw in the economy and less dramatic news emerging from Ukraine. More recently, the current push to lower levels has been justified by the continued dovish stance of other central banks, specifically the Bank of England (BOE) and European Central Bank (ECB). The former signaled today that it would keep rates low despite signs of an accelerating economy. In many ways the BOE has been a leading indicator amongst central banks actions, so their continued dovish stance has carried into other sovereign markets. The ECB is now also widely expected to implement new stimulative measures at its June meeting, with rate cuts, quantitative easing (QE) and negative Interest Rate on Excess Reserves (IOER) on the table. With the Fed’s low for long message widely accepted, the path of least resistance has been to lower yields . Continue reading…