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Tag Archives: Yield Curve

OK, Your Euro$ Curve Has Inverted, Now What?

So, the eurodollar curve has inverted. Bad news. Now what? While this is a major milestone in the monetary system’s decidedly anti-inflation/growth journey, it is hardly the end point of it. On the contrary, though it takes a lot of negative, deflationary potential to distort the curve in this way, we need to see if the market sticks with that potential rather than just some flashing rush of otherwise fleeting concern (for the record, this hasn’t happened; once upside-down, it has in the...

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This Is A Big One (no, it’s not clickbait)

Stop me if you’ve heard this before: dollar up for reasons no one can explain; yield curve flattening dramatically resisting the BOND ROUT!!! everyone has said is inevitable; a very hawkish Fed increasingly certain about inflation risks; then, the eurodollar curve inverts which blasts Jay Powell’s dreamland in favor of the proper interpretation, deflation, of those first two. Twenty-eighteen, right? Yes. And also today.Quirky and kinky, it doesn’t seem like a lot, at least not at first....

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If Not ‘Flow’, Then Has ‘Stock’ ‘Rigged’ The Flattening Curve In QE’s Favor?

Flatter. The yield curve continues to shrink in the important middle calendar spaces where growth and inflation expectations run the place. Treasuries have been doing this since around March, a peculiar (given monolithic mainstream reporting otherwise) eight-month reign of growing pessimism rather than inflationary confidence. Did the market foresee omicron more than half a year ago? No. That’s not really what this has been all about. As noted yesterday, the unnervingly steady flattening...

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Did Last Week Deliver Some Sour Certainty?

This sour/soar stuff goes back many years. The last time we went through the same hysteria (if for different reasons), everyone said the global economy was going to accelerate, take off, and sail onward forever after. The world was, they all claimed, set to soar.Globally synchronized growth. The bond market didn’t just disagree, it did so vehemently, a pessimism when 2018 began which only gained (and spread) as the year went further on. The more Jay Powell and those who followed him were...

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The ‘Growth Scare’ Keeps Growing Out Of The Macro (Money) Illusion

When Japan’s Ministry of Trade, Economy, and Industry (METI) reported earlier in November that Japanese Industrial Production (IP) had plunged again during the month of September 2021, it was so easy to just dismiss the decline as a product of delta COVID. According to these figures, industrial output fell an unsightly 5.4%…from August 2021, meaning month-over-month not year-over-year. Altogether, IP in Japan is down just over 10% since June, nearly 11% since peaking all the way back...

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Sorry Jay, Curve(s) #continuity Is Not A Good Thing

Where is the “tantrum?” If there is one, to this point it has been historically minor changes limited to the shorter end of the yield curve between the 2-year and 5-year USTs. This section of it is more influenced by what the market believes Jay Powell’s Fed will do especially now that it likely will be Jay Powell’s Fed for another (dismal) four years. That’s not tantrum territory, however. What is supposed to be is the long end where growth and inflation expectations trade more...

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Bill Issuance Has Absolutely Surged, So Why *Haven’t* Yields, Reflation, And Other Good Things?

Treasury Secretary Janet Yellen hasn’t just been busy hawking cash management bills, her department has also been filling back up with the usual stuff, too. Regular T-bills. Going back to October 14, at the same time the CMB’s have been revived, so, too, have the 4-week and 13-week (3-month). Not the 8-week, though.Of the first, it’s been a real tsunami at this tenor, too. Up to early August, Treasury had regularly (weekly) sold $40 billion in one-month paper. From then to the end of...

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Weekly Market Pulse: Growth Scare?

A couple of weeks ago the 10-year Treasury note yield rose 16 basis points in the course of 5 trading days. That move was driven by near-term inflation fears as I discussed last week. Long-term inflation expectations were and are well behaved. I wrote nearly 2000 words last week about that change in inflation expectations and I’m so glad you took the time to read it. And now you can forget it because over the next four days all but 2 basis points of the move in the nominal 10-year was...

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As Predictable Transitory ‘Inflation’, Predictably The Fed’s Taper Is (truly) Something Else

In a very real sense, neither the current rate of PCE Deflator “inflation” nor any more expected to be added by the reported LABOR SHORTAGE!!! are what’s pushing the Federal Reserve toward its next taper error. The Fed doesn’t do money, so that’s not an option for them by which to set policy parameters. All that’s left, then, is “expectations.”Jay Powell was perfectly clear (and correct, for once) about consumer prices earlier this year. Transitory. All the data, including the latest PCE...

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Short Run TIPS, LT Flat, Basically Awful Real(ity)

Over the past week and a half, Treasury has rolled out the CMB’s (cash management bills; like Treasury bills, special issues not otherwise part of the regular debt rotation) one after another: $60 billion 40-day on the 19th; $60 billion 27-day on the 20th; and $40 billion 48-day just yesterday. Treasury also snuck $60 billion of 39-day CMB’s into the market on the 14th to go along with the two scheduled 119-day CMB’s during this period.That’s a quick $220 billion above and beyond what was...

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