March employment data were just as strong as expected, consistent with a briskly expanding economy, and long-term interest rates moved up in anticipation of more hikes from the Federal Reserve. The 10-year T-note is up to 4.96 percent, and low-fee 6.5 percent mortgages are fading in the rearview mirror. The slowdown in housing, widely expected to slow the overall economy, has yet to show the slightest sign of doing so. The burden of proof is now on the theorists. During the first 18 months of Fed tightening from 1 percent to 4.25 percent, long bond yields remained stationary at 4.5 percent or below. In January, bonds changed behavior, rising in yield just before each of the last two Fed meetings to the level of the next .25 percent hike. The pattern has changed again. The Fed went to 4.75 percent last week, and bonds immediately began to move to the 5 percent, to which the Fed is expected to go on May 10. Having done so, bonds now in the habit of jumping the Fed gun, and in knowledge ...
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