Our next guest says 5.3% could be in the cards. Ben Emmons is a senior portfolio manager and Head of Fixed Income at New Edge Wealth. Ben, always good to see you. Good to be back. Thank you for having me. How long does it take to get to that 5.3% you think we’re going to head? So it does look like we’re back to where we were in the summer of last year. I’ve remembered that we had yields starting around 375 and there was a lot of supply coming in strongly economy, everybody start to reassess the risk of bonds. We’re today at 4:55, but the risk of bounces again high. So yesterday not only that CPI number being hotter and that I guess inflation risk is underpriced, but we’re dealing with a lot of supply and we’re dealing with a Federal Reserve that’s cautious and has to maybe start shifting its message saying we’re not only staying on hold, but if we’re dealing with more hot inflation, we’re going to have to get ahead of it, right. So there’s a lot of pressure on this, this market. So I think it could well lead to this 5% level that we saw in the summer of last year. Now the technicals, as I’ve shown once before, there’s this Fibonacci chart from O 7 till now. You know we’ve made really good support at 61.8 retracement, which is like around 3 1/2 percent. We’re now above the 67% retracement, which is around 4 and a quarter. So that leads you to the retracement of the top. The technicals, I think have been allowed power here. So I I do think it’s possible to get to the high technicals without question. Tim has talked about that, but at 30,000 feet, understanding you’re looking at the technicals, what do you think it means for the equity world if we get to 5.3%, it means pressure. I think I I mean it, it is a level of where treasury yields become restricted for the economy, right? And I think that’s the assessment for the stock market to say, OK, fat you having a 10 yield the same as the Fed funds rate, that puts a lot of pressure on housing, that puts the pressure on industrials and anything as interest rate sensitive. I think that’s going to be a bit of a problem for the stock market and we asked do you think we’ll see something like last summer when we saw the quarterly refunding announcement surprise to the upside and then the cadence of how they would do it. You think we’ll see a we’ll see that show again to some extent Karen, I, it was interesting a few weeks ago the the the Treasury borrowing Advisory committee, the T BAC, they had a presentation out on on on the deficit and then what they think of supply. It was notable that they forecast the T bill supply, the decline, but all the long term treasury supply to stay the same, which is large currency where we, you know auctions of 40 billion to 60 billion. It didn’t project more supply on the long end, but it definitely kept it the same. Altima supply goes down. I think that’s the tension of the treasury market. If the refunding shows that they’re bringing scaling back table issuance, the market’s going to have to price in that term premium, that term premium. By the way the Fed put out a model on this is negative currently that is now that that that is not not a good signal I think for both you you talk about in your notes also the yen carry trade and for people that don’t follow this trade to help people understand the implications of this. But that you feel this is also another potential pressure on treasuries, effectively Japanese or anyone borrowing in yen and investing in U.S. dollars, especially the treasury market. Talk about that and the move in the end, which has been contrary to what people would have expected, right, with the end of negative negative interest rates in Japan, yeah, you know, the yen going so quickly through 152, which was a little bit of a line in the sand, no liquidity there. So they’re testing even higher than 153. Last night there was this comments out by this, this official who’s actually in charge to, you know, say to the Buj, go ahead and execute, right. There’s actually some of those officials that actually said like we’re pretty close to doing any, doing something right. We’re, we’re ready to act and the market just ignored and go higher. So as the yen weakens there will at some point be this intervention probably. But what you read they’re going to likely see I think is that this yen selling of treasuries there to to cover that that yen short. Exactly. You’re going to see that unwind starting now. There’s two parts there Tim is that you have the Japanese that own treasuries that are hatched to yen, but then you also have foreign investors own Japanese stocks that are hatched to dollars. So I think this is real tension here of like having a short position yen with foreign investors, with the domestic investors in in Japan holding long treasuries. So that’s I think where you know if we’re getting this yen intervention, I think this was is a real pressure point for the treasury market.
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