Income Report Card | September 5, 2017

Category: Quant Insight

The 10-year Treasury closed at 2.16% before the long weekend, just off the year-to-date low last Thursday. For much of this year, we have discussed the trading range of rates that dominated the early part of the year (roughly 2.30% to 2.60%), followed by a new pattern (roughly 2.15% and 2.40%). For much of the summer, rates have been declining with little evidence of a turnaround. We think this appears to indicate a market preference for the safety of bonds over stocks and an assumption that certain policy items such as tax reform and infrastructure spending will continue to stall. Much of this coincides with seasonal stock weakness, with the S&P 500 failing to break above its August high. We think this indicates it is likely time to adopt a more defensive position.

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