the moves in the third year in recent days. How should we interpret that and specifically the fact that it kind of touched that nearly 5% level and now it's pulled back about 10 basis points. >> Well, a couple of things.First, 5% in my view is a great opportunity to add uh long bonds. It is a wonderful place because remember if you look historically the yield between the 2-year and the 30-year whether it's in core Europe, whether it's in the US is plus or minus around the, you know, the 20-year average. So ...

Interest Rate & Monetary Policy - The market is concerned about the potential impact of interest rate movements, particularly a return to the 5% level [1] - Despite discussions about rate cuts, the Fed's previous rate cuts didn't necessarily translate to lower long-term rates [2] - The Fed's actions at the front end may not effectively stimulate growth or inflation to significantly impact long-term rates [4][5] - Fiscal loosening has blunted the effect of monetary policy, maintaining loose financial conditions [6] - Inflation has stalled, despite expectations of rate cuts by some Fed officials [9][10] - All Fed members surveyed indicated that inflation risks are skewed to the upside [11] Economic Backdrop - The US has a surging stock market, crypto at all-time highs, and a constructive jobs backdrop at 41% [3] - A large deficit, potentially reaching $2.5 trillion, contributes to inflationary pressures [7] - Macro factors like tariffs, lower labor supply, immigration policy, and defense spending contribute to an inflationary backdrop [8] - Treasury issuance to finance the deficit creates a challenging technical environment for the long end of the yield curve [8] Credit Market - Investment grade credit fundamentals are strong, with generally good balance sheets, and these companies may receive government/Fed support if needed [14] - Below investment grade credit faces a different situation, with potentially understated default levels when considering distressed exchanges and pay-in-kind arrangements, potentially reaching a 5% default level [15][16][17]