A scrappy old bond trader once said to me: if we go below 5, we’re going to 3, and if we go below 3, we’re going to 1.

He was talking about the yield on a US 10-Year Treasury Note.

Don’t get me wrong, the saying has no scientific backing to it, but in many ways, from a sheer movements of crowd perspective it just makes sense:

1. When bonds starts to move, it’s slow. It’s a whale, turning, groaning, moving at a gradual pace, but nonetheless toward a destination.
2. Whales don’t swim for only for a 1% change. They swim for the chance it’s a 2% and 3% and beyond change.
3. The irony of cutting rates is that once they begin to get cut or drop people say “I’m not refinancing my mortgage now” or “I’m not taking a loan out now” because they wait for it to go lower. Then, by waiting for it to go lower, it goes lower.

I do believe the whale is turning as I type. We are in the back half of stage one.

Also, let’s not forget that to fight inflation, you must cause some level of deflation.