Research Summary
The report discusses the vulnerability of the long end of the yield curve. It suggests that the economy is slowing down, but a recession is not imminent as the services sector has not contracted for multiple months and jobless claims are not consistently above 300K. The report also suggests that stronger than expected economic data implies that rates have room to increase as deceleration takes longer than expected. The Citigroup Economic Surprise Index, which usually correlates positively with 10-year note interest rates, suggests that rates could rise.
Actionable Insights
- Monitor the long end of the yield curve: It appears vulnerable and may impact investment strategies.
- Consider the economic slowdown: While the economy is slowing, a recession is not imminent, which could affect investment decisions.
- Expect potential rate increases: Stronger than expected economic data suggests that rates could rise, which may influence bond investments.
