This week’s easiest conclusion: No one will be satisfied with the FOMC after its meeting next week. Bonds are obsessed with overseas risk. Stocks believe lower rates should cover a multitude of economic sins by political leaders. Monthly data are impossible to trend, and lower data forecasts still turn out to be too upbeat. Last week’s dominant headline – Mexican tariffs – is this week’s footnote. FOMC participants might consider a longer blackout period just to get away from it all. Yet, serious work looms so start with a focus on a flatter real interest rate curve that suggests the Fed may not cut rates i) as much money market forwards suggest; and ii) primarily due to lower inflation rather than nearby economic distress. Investors have decided it remains better to own a debt obligation than to put their faith in a turnaround that would produce better returns in stocks and commodities over the next 12 months. As a corollary, odds are falling quickly that government/central bank stimulus can reverse an ebbing tide as the margin for error shrinks. Whatever the FOMC says about inflation this year, a look at underlying components outside housing finds a transition from “not rising” to falling in the May numbers. A core increase of only .113% is the lowest in two years, adjusting for the size of the immediately preceding months. Rather than argue any one inflation gauge is correct, Inflation Lab looks at more than a half dozen. The most recent household surveys of future inflation fell sharply, by the way. Markets have calmed to the point – albeit at lower yields – that it’s possible to isolate fixed income alternatives offering relative value. A quick check of core fixed income sectors finds that yields in callable agencies have fallen the least in the short end, with the second lowest yield erosion in intermediate maturities. First, a comparison of spreads by maturity and call structure during the last 9 months, then a brief explanation of how yield and funding cost curves are critical to relative value found in callables this month.