The 10 year T dropped to 2.09% yesterday, hitting their lowest levels since the day after the 2016 Presidential election (when yields spiked on expectations of imminent fiscal policy out of Washington). A combination of factors are contributing to the “risk off” trade (1) North Korean missile test over Japan (worries were somewhat tempered by initial indications of UN sanctions instead of hostilities); (2) Hurricane Harvey’s massive devastation in America’s fourth largest city, expected to lower GDP by 0.2%; (3) Persistent low inflation; (4) Mixed messages from politicians regarding September’s “must pass” debt ceiling increase. Interestingly, the administration is beginning to outline parts of their long awaited tax package, but few details have emerged such as “revenue neutral” metrics. Will the big cuts be offset by increases and/or deduction adjustments? That’s always the “heavy lifting” in negotiations around forming tax proposals. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners
