The safe haven moves into
treasuries based on uncertainty in the Ukraine appears to have eased a little
overnight. It wasn’t expected to last long as far as a fear factor that
would continue driving safety trades. The situation is not likely to lead to
significant military action with Russia moving in to secure Crimea, however the
turmoil will continue for a long time, just not at a level that should worry
investors.
Janet Yellen completed her
required semi-annual testimony yesterday to the Senate Banking Committee.
She took a stab at the administration on the push to increase the minimum wage;
the CBO report said the White House proposal to increase it to $10.10 would
lift 900,000 people out of poverty, but lead to the elimination of 500,000
other jobs. The administration argued the CBO over-stated the impact of lost
jobs; Yellen contradicted that argument. The CBO “is as qualified as anyone to
evaluate the literature,” she said. “I wouldn’t want to argue with their
assessment.” She is staring out carving her own path. On the housing bubble
that led the recession and global financial crises she deviated from Bernanke’s
view that the problem was caused by foreign investments running wild and not
low interest rates. Yellen said she “would not argue” with other economists who
believe low rates contributed to the buildup of leverage in the financial
system in the 2000s and a housing bubble.
Everything
is working against the rate markets this morning; the economic releases better than forecasts and less fear over Ukraine
have erased all the gains over the last two days. The 10 at 2.69% is up 5 bp
today. We have been floating the last two days but warning it was risky. Today
clearly demonstrates that unless there is a momentary safety move and unless
economic data is weak the path is still for higher interest rates.
I am still recommending that you lock your rate.
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