Exciting Times, But Don't Get Too Excited

There's no question that the past 5 days have been the best 5 days that we've seen in a long time in terms of direction movement in rates. They're made all the more miraculous because the past 2 days included much higher inflation readings. In a vacuum, inflation data was bad for rates. But the opposing forces are/were stronger in this case. There are two to consider: AI/tech correction and bond seller exhaustion. We've said for a while that yields would eventually be high enough to prompt some value buying and that 5.34-5.35% may be 2026's version of 2023's 5.00%. As luck would have it, that factor coincided with a rapid increase in the tech sector, primarily driven by Coreweave, but with the word "contagion" also being thrown around. Here's why you should temper excitement: to whatever extent "contagion" doesn't materialize, bonds will lose a good amount of the support they've recently enjoyed. What we've seen so far could be considered "act 1" of a very enjoyable show, but it could also be a short story that ends here. The only surefire justification for a bigger rally is a sustained economic slowdown, preferable coinciding with the war ending and oil falling.