00:00What's going wrong in your fixed income this morning?
00:02Well, I think a couple of things synced up last week.
00:05One is we got midway through the week and it was clear there wasn't going to be a peace accord
00:10in the Middle East during UN week.
00:12So suddenly you've got oil going higher.
00:15You've got everyone concerned about the second round effects of that.
00:19Will that get passed through to finished goods and services?
00:22And then you had some Fed speakers come in, notably New York Fed President Williams,
00:28talking about more may need it to be done.
00:32And if you go back a week earlier, he was one we thought could be a dovish dissent.
00:37And I think those couple of things caught the market off guard.
00:40Probably there were a couple of stops along the way.
00:42So we've had the backup.
00:44Is that enough to change your mind?
00:45And if not, why?
00:47It's not.
00:48One of the things that puzzled us is the move from 3.90 to over 4% to over 5
00:53% was pretty orderly.
00:56And we were always looking for a blow off top.
00:58We never got it.
00:59We hit our nominal and real yield levels.
01:01We did some buying.
01:03For us, the bigger problem was when we got down to 493, do we chase it?
01:08So 523 is a much happier place for us in the bond market.
01:12We can go back in, buy with some yield.
01:15At this point, there's a question about whether we're going to see yield curve flattening or yield curve steepening.
01:20We had seen pretty steady yield curve flattening.
01:23When people were expecting the Fed to do that much more.
01:26Now, as John was saying over the past couple of sessions after that PMI print, you've seen an expanding in
01:32the yield curve.
01:32Do you expect that to continue?
01:34I don't.
01:35It feels to us the entire yield curve is oversold.
01:39The demons have set in.
01:40Everyone has PTSD going back to 2022.
01:45Does the Fed have to do 200 basis points or more?
01:48I think once we get PCE this week, once we see the labor market, things will start to settle down
01:55again.
01:56So you're backing up the truck?
01:58Backing up the truck is your term, not mine.
02:01Are you aggressively buying right now?
02:03If we see some stabilization here, we have our next buy level.
02:07We've got plenty of buying yet to do.
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