From Italy to DC, mapping direction of rates

Which way will interest rates go next? Interest rates soared in recent weeks with the 10-year US government note, for example, settling comfortably over 3 percent. Then suddenly this week, it wasn’t over 3 percent anymore as buyers rushed into the bond market and the heightened demand caused rates to decline noticeably.

On Wednesday, the rate on the 10year was around 2.85 percent.

On Friday, the monthly employment report will be released by the Labor Department, and we’ll see whether that news will push interest rates over the important 3 percent level again.

But truth be told, the job report isn’t the only thing going on right now — and it’s probably not even the most important.

With chaos in the Italian government hurting global financial markets, foreign investors will probably decide to put more money into US se- curities in the days and weeks ahead.

When demand for US securities goes up, interest rates go down — unless something bigger, like an all-out trade war with China kicks up or signs emerge that the world economy is blasting off and that inflation is getting out of control.

Political confrontations in Washington that cause foreigners to question the stability of the Trump administration would be another overriding concern.

Given all that going on, it’s even possible — although not likely — that the Federal Reserve, which meets again in the middle of June, will decide not to raise the interest rates it controls.

A rate hike of one-quarter of 1 percent is widely expected.

Wall Street is also expecting that Labor will announce that 185,000 jobs were created in May. That would be an improvement from the disappointing 165,000 new jobs that were created in April.

The unemployment rate, which is a worthless economic indicator, is expected to remain at 3.9 percent.

The experts are also expecting hourly wages to have increased by 0.2 percent in May from April levels. The increase in wages was 0.1 percent from March to April.

While the average American would be thrilled by strength in employment and wages, the financial markets won’t be overjoyed if either the number of new jobs or wages comes in much stronger than expected.

That would be taken as a sign of impending higher inflation and a more aggressive Fed.

So then, what will be the dominant force in the market over the next week or so? The chaos in Europe? A full dose of Washington chaos — still to come with reports on investigations of the last election? Or the economic data?

The answer: Probably all of the above and some things I haven’t even thought of.

I’m hearing that the release of the report from Justice Department Inspector General Michael Horowitz is imminent.

The report could come out as soon as Thursday.

Sen. Chuck Grassley ( R-Iowa) and his Judiciary Committee have a hearing scheduled for Tuesday to go over the report.

I’m told by Grassley’s office that Horowitz will attend and will be questioned.

The IG has been looking into the FBI’s handling of the Hillary Clin- ton e-mail investigation during the election. As I wrote while that probe was going on, then-FBI Director James Comey and a few bureau high-ups seemed to be covering up for Hillary.

I’m hearing that the report will be very critical of the former heads of the CIA and the FBI — as well as the agencies themselves.

The phrase “constitutional crisis” keeps coming up, and I don’t think that is an exaggeration as to what might happen because of the report’s findings, many of which will remain classified and not released. The Democrats will need to counter the report with a sizable offensive.

On top of everything else going on, the markets will have to deal with the fallout from this report.

Readers: I think you’ll get a kick out of this letter from a prison guard on the serious scam I’ve been writing about regarding prisoners and their medications.

This also is about squirrels with a drug problem:

Mr. Crudele: I retired after 27 years in New York State Corrections, of which 22 were as a sergeant. So many of the state facilities actually have social workers and case workers whose full time job is to get inmates approved [for disability payments]! We laugh and call the front of the Medical Building “Skittles Land,” since, in the snow, the thousands and thousands of mental health drugs that are spit out are coloring the ground. Or the inmate sells them to other inmates to get high. My last facility was Midstate Correctional, and I’m here to tell you we had problems for years with squirrels and skunks eating the damn medications. We’d have tailless squirrels from running through the razor wire to get the meds, and we have literally had an officer attacked on the walkway by a seemingly stoned squirrel. The scam gets better. For example, we get a 65year-old Spanish male who is non-English speaking, and let’s say he has no formal education. When they go through reception [after being admitted], they are given a battery of tests to determine education level. If they have less than a 6th grade reading level, inmates are forced to attend classes. Why? The feds reimburse the state for the “student’s” lunch.