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September 11, 2017 By Peter Boockvar

Today’s 3 yr note auction was soft. What it means…


A week before Quantitative Tightening will begin and with very much reduced expectations that the Fed will follow with a rate hike in December, the 3 yr note auction did not go that well. The yield of 1.433% was above the when issued of 1.425-1.43%. The bid to cover of 2.70 was below the one year average of 2.83. And, direct and indirect bidders took 57% of the auction which was slightly below the 12 month average of 61%.

Bottom line, it seems like we’ve stretched this interest rate rubber band too far on the downside for now leaving yields much less attractive in today’s auction. Certainly relief over the reduced damage expectations from Irma helped with that. Also and all else equal, Bill Dudley told everyone last week that he still expects more rate hikes and the bond market clearly hasn’t believed him. In fact, Brainard’s hesitancy has been more of what the market has attached itself to. Market participants have so clung to the recent drop in the inflation rate and think the Fed should stop everything without grasping that rates are still ridiculously low and raising rates just 3 times a year is a pathetically slow pace. I’ll repeat my belief that if the S&P 500 handles QT without a hitch and all else equal on the economy, the Fed will be hiking rates again in December. I’m not arguing that everything is copasetic with the US economy and can handle more tightening, I’m just trying to get into the mind of Fed officials and what they are focused on.

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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