The main driver in the note complex has been the resurgence of inflation. Recently, we have seen many of the commodities make big moves to the upside including grains and oil and the debate now is beginning, is the fed in denial that inflation is beginning to accelerate more rapidly than desired? Many fed speakers have come out recently saying that inflation currently is of no concern, but one must look at many of the markets and the cost of basic needs at the store. Prices are indeed going higher and the fed might be behind the curve. In addition to many of the commodities rallying, constant talk to add additional stimulus also is contributing to the recent inflation surge. Also, this morning we saw retail sales blow away expectations which should have been negative for the notes, but we see the 10’s up 4 ticks on the day. I suspect the market is short traders are covering some positions. Yesterday terms of yields, the 10-year hit 1.31, which is the highest we have been in over a year. A test of the psychological 1.50% is likely to be tested in the near term. Traders should take the sell the market on rallies until proven wrong.

10-Year Note Mar ’21 Daily Chart
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Greg Perlin

Senior Market Strategist

Greg is a former Chicago Board of Trade member. He was an independent floor trader, pit broker and floor broker with Cantor Fitzgerald. Some of his clients included traders from Morgan Stanley and Lehman Brothers. He also acted in the capacity of desk manager for the morning trade desk. Greg was part of the elite Lind Plus Division for 10 years before joining RJO Futures in 2011.

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