The week started with the markets panicky that the omicron variant was going to drive the world back into lockdown, but that fear has subsided going into the last trading day of the holiday shortened week. The long bond is challenging the high yield of the month, trading at a yield-to-maturity of 1.90%, but still solidly below 2.0%. Economic data this week, all secondary in importance, continues to point to a robust economy. Investors seem to be turning a blind eye to three projected rate hikes, as the S&P 500 is again within basis points of another all-time high.

This time of year we watch for imbalances that can cause what’s known as “over-the-turn” shocks to the market, but we’re not witnessing anything to worry about. There’s plenty of liquidity in the system as evident by the Fed’s reverse repo which has climbed to $1.7 trillion, so a year-end borrowing spike seems unlikely. Similarly, in the foreign exchange markets, the premium to own Dollars, which spiked earlier in the month has nearly evaporated. Finally, aside from initial claims for unemployment insurance, there is no material economic data and no Fed speakers on the calendar for next week. That’s not to say that we’re all clear for year end, but as we close out the week, we’re expecting the final days of the year to be orderly.