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Real Time Insight

We got a weak earnings report from JP Morgan on Friday.

According to reports, revenues from their fixed income businesses were $3.76 billion, compared with $4.75 billion a year ago.  Analysts have slashed earnings estimates in recent weeks across a range of big banks, as fixed income trading revenue disappoints.

At the start of 2014, the consensus inside annual market outlooks was for the 10-year U.S Treasury rate to climb to 3.5% or more by the end of the year.  In May 2013, the 10-year rate was 1.6%.  By early September 2013, it had gotten to 3.0%.  After falling back during the Federal government shutdown on a safe haven bid, it rose back to 3.0% by the January 1, 2014.  The correlation to higher rates was attributed to the Fed’s tapering.  Market anticipation of Fed tapering did the bulk of the heavy lifting.

Then, something surprising to this consensus hit fixed income markets.  The 10-year U.S Treasury has wandered in a narrow range.  It gets no lower than 2.6%.  It gets no higher than 2.8%.  That’s not creating much volatility for fixed income traders to play with.

Slack fixed income markets must be behind some of the overall stock market index weaknesses too.  The blow-up of the so-called “30-year Bond Bubble” was supposed to be bursting as the Fed tapered bond purchasing.  So far, it’s not happening.

My RTI Question?  Is the Fed taper a Non-Event?  In other words, is the 10-year U.S Treasury rate not going to rise inexorably higher this year? 

Read the analyst report on JPM

Read the analyst report on C

Zacks Investment Research

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