As I write this, the US 10-year Treasury bond is yielding 1.457%, well under the trading range it had established during this quarter. And there are a lot of theories as to why this is happening. I want to spell out how I’m thinking about the yields and what the risks and opportunities are going forward. So let me start with what the Fed can and cannot do to influence that rate and move from there to market participants and the outlook for real economy as the three main determinants. The Federal Reserve’s role Because of the Federal Reserve’s role as a monopoly supplier of reserves, it sets overnight rates with an iron fist. All of the discussion around interest on reserves and reverse repos is noise regarding how to best enforce its monopoly power in a world awash in excess reserves. But the macro picture is one where the Fed dictates the overnight rate and the market moves to that rate now and in the future.…