The bond market liked today's Beige Book, the collection of regional surveys of economic activity conducted by each of the 12 Fed district banks. While Q3's real GDP growth was revised up to a red hot 5.2%, the latest survey from October 6 to November 17 was more like a cool beige color. Six of the 12 Fed banks reported slight declines in economic activity. Two others were "flat to slightly down." Demand for labor "continued to ease, as most districts reported flat to modest increases in overall employment," the Beige Book said. Wages also grew a bit more slowly. Price increases "largely moderated" across the country, the Beige Book found, and "most districts expect moderate price increases to continue into next year."
The 2-year Treasury yield continued to fall to 4.64% from a recent high of 5.19% on October 18 (chart). The 10-year Treasury yield fell to 4.27%, which is almost back to last year's high on October 24.
Investors are starting to worry about reinvestment risk in the money markets. There is a record $5.76 trillion in money market mutual funds (chart).
There's also lots of cash sitting in M2 deposits (chart). Some of that money might also move into stocks and bonds if depositors start to worry that deposit rates might fall along with money market rates.