What’s behind the drop in long-term Treasury rates?

  • It's possible that the largest recent downward push is extremely hard to quantify: geopolitical risk.

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Inman Connect San Francisco, Jul 16-20, 2018

Last week was what the military calls “target rich.” The first: Long-term rates on Wednesday broke out of the bottom of a range, 2.30-2.60 percent, which has held since November. The 10-year T-note dropped to 2.23 percent, taking low-fee mortgages almost to 4.00 percent. There is plenty of discussion about why the move has been down, instead of out the top, but the catalyst is perfectly clear: Donald Trump’s extraordinary 70-minute WSJ interview on Wednesday. Sometimes we struggle to understand cause and effect in markets, but the rate improvement came instantly upon the last of these economic policy shifts: Trump embraced the Ex-Im Bank (hated by his party). He acknowledged that China is not a currency manipulator (it is, of course, but for the last two years has desperately tried to strengthen the yuan, not weaken it to take trade advantage). Chair Yellen is “not toast," and although it’s too early for re-appointment, Trump has met with her in...