JAMES The Bond Market Monitor
FRED DATA
Apr 5 2026
LIGHT MODE
10Y − 2Y Spread
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10Y − 3M Spread
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Term Premium (ACM)
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5Y5Y Forward
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MOVE Index
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Rate vol (VIX of bonds)
Yield Curve & Spreads
10Y − 2YT10Y2Y ↗
—%—
Classic recession signal. Inverted when short rates exceed long. Re-steepening after 2022–24 inversion.
Signal
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10Y − 3MT10Y3M ↗
—%—
NY Fed's preferred recession predictor. Now positive — inversion ended late 2024 as Fed cut rates. Most historically reliable recession signal.
Signal
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10Y TreasuryDGS10 ↗
—%—
Global benchmark rate. Drives mortgage rates, corporate borrowing, and equity discount rates.
Level
—
Fed FundsFEDFUNDS ↗
—%—
Anchors the short end. Fed has cut 100bps since Sept 2024; short end now below 10Y.
Stance
—
Term Structure Decomposition
Term Premium (ACM)NY Fed ↗
—%—
NY Fed ACM model. Decomposes 10Y into expected short rates + duration risk premium. Back positive — investors demanding more compensation to hold long bonds.
Premium
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5Y5Y Forward RateT5YIFR ↗
—%—
Market's expectation of 5Y rates 5 years forward. Strips near-term noise. Above 3.5% = market repricing neutral rate ("r*") structurally higher.
r* View
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10Y Real Yield (TIPS)DFII10 ↗
—%—
Inflation-adjusted yield. Positive real yields = tight conditions. Above 2% is historically restrictive and weighs on growth assets.
Conditions
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Inflation Expectations & Credit
10Y BreakevenT10YIE ↗
—%—
10Y nominal minus TIPS. Market's 10Y inflation expectation. Near 2.3% = modestly above Fed target but anchored.
Anchored
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HY Credit SpreadHYM2 ↗
—bps—
ICE BofA HY OAS. <300bps = tight/risk-on. >600bps = stress. Near post-GFC tights — risk appetite intact.
Stress
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IG Credit SpreadC0A0CM ↗
—bps—
Investment grade OAS. Subtle leading indicator. <100bps historically tight. Widens before stress shows in HY.
Stress
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Inflation Term Structure — Near vs. Far
Inflation Expectations Across the CurveFRED ↗
1Y Exp. & 5Y BEI (near-term) reflect energy & supply shocks. 2Y Exp. is the mid-point. 5Y5Y Forward reflects long-run growth expectations. 1Y and 2Y use Cleveland Fed model (EXPINF1YR, EXPINF2YR). 5Y and 10Y use TIPS breakevens. 5Y5Y uses T5YIFR.
How to read this
NEAR HIGH + FAR FALLING — Stagflation Risk
Short-end BEI spikes on energy/supply shocks while 5Y5Y falls — the market is pricing a growth shock downstream even as near-term inflation rises.
ALL RISING UNIFORMLY — Credibility at Risk
Inflation expectations entrenched across all tenors. Long-end breakevens above 2.7% = Fed credibility warning.
NEAR ELEVATED + FAR STABLE — Base Case
Near-term inflation elevated but 5Y5Y anchored near 2.5%. Market trusts the Fed to bring inflation down over time.
Recession ProbabilityNY Fed ↗
~5%
12-MO
NY Fed probit model from T10Y3M spread. T10Y3M now positive — inversion has fully unwound. Recession probability near historical baseline.
● LOW RISK
Expected Short Rates
ACM rate expectations
3.71%
+ Term Premium
ACM duration risk
+0.58%
= 10Y Nominal
Total observed yield
4.29%
⏳ Fetching latest bond market data via AI… (falls back to Mar 20 cached values if unavailable)
Overnight Funding — Reserve Stress Indicators
SOFR — Secured Overnight Financing Rate
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The actual cost of overnight borrowing in the repo market, secured by Treasuries. Published daily by the NY Fed. This is where money market stress shows up first.
IORB — Interest on Reserve Balances
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The rate the Fed pays banks to park excess reserves overnight. Set directly by the FOMC — it acts as the effective floor for short-term rates.
SOFR − IORB Spread — The Stress Signal
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When reserves are abundant, SOFR trades below IORB. As the spread approaches zero — or goes positive — it signals reserves are becoming scarce in the system.
● ABUNDANT
WRESBAL — Reserve Balances at Fed
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Total reserves held by banks at the Federal Reserve, in billions. Quantitative Tightening (QT) directly drains this number. Watch for accelerating declines.
SOFR / IORB Spread vs. Reserve Balances Over TimeFRED ↗
SOFR − IORB SPREAD
Plotted in basis points on the left axis. Near zero or positive = funding stress. Normal range is −5 to −20bps.
RESERVE BALANCES
Total reserves held at the Fed in $billions, right axis. QT reduces this over time. Below ~$3T the spread becomes sensitive.
ZERO LINE
The critical threshold. When the spread crosses above this line, SOFR ≥ IORB — historically a signal for Fed intervention.
Stress Regime Reference
ABUNDANT
Spread < −10bpsSOFR well below IORB. QT proceeding normally. Banks flush.
WATCH
−10 to 0bpsReserves tightening. Fed watching. QT likely to slow.
STRESS
0 to +10bpsSOFR at or above IORB. Intervention likely. Sept 2019 analog.
CRISIS
> +10bpsRepo market seizing. Emergency repo ops or rate cut expected.
WHY WRESBAL MATTERS
QT gradually drains reserves from the banking system. As WRESBAL falls toward ~$3T, the SOFR/IORB spread becomes more sensitive to daily fluctuations. The Sept 2019 repo spike occurred when reserves reached ~$1.4T. The Fed does not know in advance where the critical threshold is — this spread is their real-time gauge.
The Funding Stress Mosaic
MOVE Index — Bond Market VolatilityTVC:MOVE ↗
——
The "VIX of the bond market" — measures implied volatility on US Treasury options across 2Y, 5Y, 10Y, and 30Y maturities. Rising MOVE means the bond market is pricing in larger rate swings ahead. Normal: 55–100. Elevated: 100–130. Crisis: >130.
Rate Vol
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3M Financial CP vs T-BillDCPF3M ↗
—bps—
Commercial paper spread — the 3-month financial CP rate minus the 3-month T-bill yield. CP is unsecured short-term borrowing used by large corporations. When this spread widens, it signals that institutions are demanding extra compensation to lend to banks and corporates overnight — an early sign of funding stress moving into the real economy.
CALM
<20bps
WATCH
20–50bps
STRESS
>50bps
CP Stress
CALM
Cross-Currency Basis (USD)Bloomberg ↗
—bps
The USD/EUR or USD/JPY 3-month cross-currency basis swap. It measures the premium (or discount) required to synthetically borrow US dollars via the FX swap market. A more negative reading means global dollar funding is becoming scarce — foreign investors are paying up to access dollars. When this widens sharply, it often signals broader stress in international funding markets, since the US dollar is the world's primary funding currency.
ℹ Live cross-currency basis requires a Bloomberg terminal — not available via FRED. Check Bloomberg ↗ or Reuters for current levels.
Dollar Funding
STABLE
🔌 Data is live via FRED. SOFR (
SOFR), IORB (IORB), Reserve Balances (WRESBAL), and CP rate (DCPF3M) all update daily from the St. Louis Fed. Cross-currency basis requires Bloomberg and is not available through FRED.
Shock Library
Macro
IS/LM
AD/AS
Manual Inputs
Transmission Logic
Load a scenario or adjust sliders to see the transmission channel here.
Projected Metrics vs. baseline Mar 2026
JAMES — The Bond Market Monitor
A real-time dashboard and scenario simulator for US Treasury markets. Track the yield curve, term premium decomposition, inflation expectations, credit spreads, and overnight funding stress — then stress-test them against macro, IS/LM, and AD/AS shocks. Connect your free FRED API key for live data on all indicators.
Funding Stress tab — Overnight Funding Indicators
🔧 SOFR / IORB Spread
SOFR
Secured Overnight Financing Rate. The actual cost of overnight borrowing in the repo market, secured by Treasuries. Published daily by the NY Fed (FRED: SOFR).
IORB
Interest on Reserve Balances. What the Fed pays banks to park excess reserves. Sets the floor for overnight rates. Directly controlled by the FOMC (FRED: IORB).
Spread (SOFR − IORB)
The stress signal. Normal: SOFR trades 5–15bps below IORB (abundant reserves). As QT drains the system and spread approaches zero, reserve scarcity is emerging. The Sept 2019 repo crisis saw SOFR spike above IORB.
WRESBAL
Total reserve balances held at Federal Reserve banks ($billions). QT directly drains this number. Watch for the level and the rate of decline — when it approaches $2.5–3T the spread becomes more sensitive.
📡 The Full Mosaic
MOVE Index
Bond market VIX. Normal: 55–100. Elevated: 100–130. Crisis: above 130. Watch for divergence with VIX — MOVE leading VIX higher is a warning.
CP Spread
3-month financial commercial paper rate minus 3M T-bill. Proxy for unsecured short-term corporate borrowing stress. If large companies start paying abnormal spreads to raise CP, stress is moving downstream quickly. (FRED: DCPF3M vs DTB3)
Cross-Currency Basis
USD/EUR or USD/JPY 3M basis. Measures the premium to borrow dollars synthetically via FX swaps. Widening negative = global dollar funding stress. Bloomberg data; not on FRED. The marginal buyer of Treasuries (foreign) is the key channel.
Inflation Term Structure
Near/far split: 1Y and 5Y breakevens vs 5Y5Y forward. If short-end spikes while 5Y5Y falls, the market is pricing a growth shock downstream. That's the stagflation warning pattern.
Dashboard — what each metric tells you
📐 Yield Curve Shape
10Y − 2Y
Classic recession signal. Negative = inverted. Every US recession since 1955 was preceded by inversion, typically 12–18 months prior.
10Y − 3M
NY Fed's preferred model input. More sensitive to near-term Fed policy. Currently inverted — the most historically reliable warning signal.
Fed Funds
Anchors the short end. When above 10Y, the curve inverts. The gap drives the slope and the recession probability gauge.
10Y Treasury
The global benchmark. Sum of expected short rates + term premium. Drives mortgages, corporate borrowing, equity valuations.
⚗️ Term Structure Decomposition
ACM Term Premium
Isolates the duration risk component of the 10Y yield. Negative = investors accept less to hold duration. Rising = supply pressure or uncertainty.
5Y5Y Forward
Market's view of where rates will be in 5 years, 5 years from now. The cleanest read on long-run neutral rate (r*) expectations.
10Y TIPS Real Yield
Inflation-adjusted rate. The actual cost of capital. Above 2% = genuinely restrictive. Key driver of equity P/E compression.
10Y Breakeven
Nominal minus TIPS. Market's 10Y inflation expectation. Fed credibility gauge — a break above 2.7% is a warning signal.
📊 Credit & Risk
HY OAS
High yield option-adjusted spread. The risk appetite barometer. <300bps = tight. >600bps = stress. Leads equity vol in downturns.
IG OAS
Investment grade spread. More subtle than HY — widens first before stress becomes obvious in high yield. Cross-asset early warning.
Recession Prob.
NY Fed probit model using T10Y3M. Shows 12-month recession probability. Shows decomposition of 10Y = expected short rates + term premium.
🎛️ Simulator Inputs
Fed path
Cumulative cuts (negative) or hikes (positive) in percentage points. Directly moves the short end via expectations.
Inflation shift
Change in expected inflation (CPI/PCE). Moves breakevens, and through them, real yields and the long end.
Growth impulse
Demand-side growth shock. Positive growth raises rates via IS curve; also compresses credit spreads.
Fiscal deficit shock
Increase in government borrowing as % of GDP. Raises term premium via bond supply and crowds out private capital.
Risk appetite
Positive = risk-on (compresses spreads, mild rate rise). Negative = risk-off (widens spreads, flight-to-quality bid).
IS/LM shocks — how they map to bond markets
IS Shock — Demand
Positive IS shift
Growth ↑Rates ↑
Fiscal stimulus, confidence surge, or investment boom shifts IS right. Higher growth raises demand for loanable funds → 10Y rises, curve steepens, spreads compress.
IS Shock — Demand
Negative IS shift
Growth ↓Rates ↓
Demand collapse, deleveraging, or fiscal contraction. Rates fall, curve may invert if Fed is slow to respond, spreads widen on recession fears.
LM Shock — Money
Tighter LM (Fed hikes)
Short end ↑↑Curve flattens
Fed shifts LM left. Short rates rise sharply, long end rises less (expecting eventual reversal), curve flattens or inverts. Real yields rise, growth slows with lag.
LM Shock — Money
Easier LM (Fed cuts)
Short end ↓↓Curve steepens
Fed cuts rates. Short end falls fast. Long end sticky (inflation risk priced in). Curve bull-steepens. Term premium may rise if market doubts Fed will stick with cuts.
IS + LM Combined
Liquidity trap
Growth ↓↓Rates → 0
Demand collapse + Fed at ZLB. IS shifts left but LM can't shift further right. QE directly buys duration → term premium collapses. Real yields deeply negative.
IS + LM Combined
Crowding out
Deficit ↑Term prem ↑
Fiscal expansion raises government borrowing demand. Shifts IS right but also shifts LM left via higher rates. Term premium rises, crowding out private investment.
AD/AS shocks — how they map to bond markets
AD Shock
Positive AD shock
Growth ↑Inflation ↑
Consumer/government spending surge. Growth rises, inflation rises. Bonds sell off across the curve. BEI widen, real yields rise. Fed likely responds with hikes.
AD Shock
Negative AD shock
Growth ↓Bonds rally
Demand collapses. Recession risk rises → flight to safety. Yields fall, curve inverts if Fed slow to respond. Spreads widen, BEI fall, real yields compress.
AS Shock
Positive supply shock
Growth ↑Inflation ↓
Productivity boom or commodity price fall. Goldilocks for bonds — real yields can be stable or fall. BEI fall, nominal yields mixed. Favorable for duration.
AS Shock — Stagflation
Negative supply shock
Growth ↓Inflation ↑
Stagflation: worst case for bonds. BEI rise (inflation), but growth-sensitive parts sell off. Fed in a bind — can't cut without risking inflation. Curve distorts.
AS Shock
Productivity acceleration
r* ↑5Y5Y ↑
Structural increase in potential growth (e.g., AI productivity). Reprices the neutral rate r* upward. 5Y5Y forward rises, long yields structurally higher, curve steepens.
Combined
Fiscal dominance
Deficit ↑↑Term prem ↑↑
Government borrowing crowds out private capital, raises supply of bonds. Term premium surges. Effectively an AS-left shift as real borrowing costs rise across the economy.
How to use the simulator step by step
1
Pick a tab in the Shock Library
Macro presets cover standard scenarios (soft landing, recession, etc.). IS/LM presets model monetary and demand shocks. AD/AS presets model supply and aggregate demand shifts. Each preset pre-loads the five sliders with calibrated values.
2
Read the Transmission Logic box
Below the sliders, JAMES explains the economic channel for the current combination of inputs — what's driving each key move and why.
3
Examine the projected metrics
The right panel shows every metric's baseline (Mar 2026) → projected value with color-coded change badges. Green = improvement (wider spreads, lower stress). Red = deterioration. The fill bar shows the level in historical context.
4
Combine shocks manually
Load a preset, then move individual sliders to layer on additional shocks — e.g., start with a negative IS shift (recession) and then add a fiscal deficit shock to simulate a recession + stimulus package response.
5
Limitations to keep in mind
JAMES uses a reduced-form model, not a full no-arbitrage term structure model. Relationships are calibrated to historical averages and may not capture non-linear regime changes, global spillovers, or market microstructure effects. Use it for directional intuition, not precise forecasting.