Today’s relatively weak demand auction of 10 year T’s followed a strong 3 year T auction yesterday. This could be an indication that the market believes that future Fed hikes will be slow and gradual, and that low short term rates may push inflation. Also, recent statements by Fed committee members indicate that the long awaited balance sheet reduction may start next month. Since those holdings are mostly long dated Treasuries and MBS, the unprecedented public to private “demand transfer” may lead to higher long term rates. As of now, the 10 year is 2.24%, so still trading in a tight range. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners.