The RateWatch
 Commentary by Bill Brizendine of Melody Capital MarketsThe yield on the 10-year UST jumped 11 bps last week to close Friday at 4.80% as hope the Fed might lower rates by year end continued to fade. The minutes of the FOMC meeting of September 20 revealed that the governors, while acknowledging the continued slowdown in housing and deceleration in overall economic activity, remain consumed with a fear of inflation (one governor actually voted to raise rates). Retail sales were down from August, but mostly as a result of the rapid decrease in energy prices. And, although the job market remains statistically tight, wage growth was modest according the Fed’s own Beige Book report. Not a lot to inspire fear of inflation, but apparently enough. The data-driven Fed will have several important reports to mull over this week. The CPI, due out on Wednesday, is expected to be low or even negative due to the dramatic fall in energy prices (who’d have thought $2.60 a gallon gas would lower inflation?). However, the “core” rate of inflation – which excludes food and energy prices – is expected to rise. We have seen nearly a 25 bp increase in 10-year yields over the last seven trading days. It could be another rough week for Treasuries, unless the market has already priced in the expected response of the Fed to this week’s news or if that news suggests more of an economic slowdown and less core inflation than forecast. Download The RateWatch: A one-page analysis of institutional lending rates Download Treasury Forecasts |