Daily Market Color March 25, 201910 Year Yield Falls to Lowest Point Since 2017 Treasury yields continue to plunge, 10 year yield falling to lowest point since mid-2017. In June of 2017 the Fed’s benchmark interest rate sat at 1.25%- a full five hikes lower than the current benchmark interest rate. The remarkable convergence now has 10 year Treasury yields sitting below the overnight Fed Funds rate- with swap spreads such that the long end of the swap curve continues to trade below comparable term Treasury yields as well. The ~20 basis point drop in rates over the past week now implies an 80% likelihood of a Fed rate cut by 2020. Perhaps more importantly, the swap curve is essentially flat with 2’s / 10’s sitting at a spread of a mere 3 basis points, while the 10 year Treasury yield is flat to 3 month bills and just 15 bps over the 2 year Treasury yield. Equities mixed as investors continue to digest worsening economic data. Despite the continued sharp bond rally, the S&P 500 only fell 0.1% while the Dow Jones Industrial Average actually rose 0.06%. Investors failed to find solace in the news that Robert Mueller found that President Trump’s 2016 campaign did not conspire with Russia, and instead focused on the streak of poor economic data received recently from Europe and Asia. The VIX or “Fear Index” was actually down (closing at 16.33), suggesting that this latest rough patch in equities is relatively orderly. Looking ahead. Tomorrow markets will be focused on housing starts and building permits data for the month of February, along with the latest S&P Case-Schiller Home Price Index. The market will also get the latest Conference Board consumer confidence data, which is expected to rise slightly to 132.5. On Friday, markets will get the latest PCE data- a key inflation indicator for the Fed, and a potential catalyst for future market volatility.