ridethepig

Yields continue breaking higher as expected

TVC:US10Y   US Government Bonds 10 YR Yield
=> Yields are creeping higher one more time and we are starting to see major moves across equity markets as a result.
=> Smart money is afraid of inflation returning and therefore selling bonds is the go-to. This is causing yields to rise and because we are reaching the end of the road on QE , Central banks won't be buying bonds anymore and want to diminish their positions in order to clear up the balance sheets.
=> Whitehouse needs are no longer going to be met by the FED so investors will have to supply the money and at 3% they are not very willing.
=> Expecting fireworks across the board for this Quarter with all eyes on 3.22
=> As you all know, higher yields will compete with equity returns making bonds on the longer end more attractive ....
=> Good luck all those tracking the US 10 year
Well , I think Powell will buckle , but only after the Market breaks below the lows of February around 2350 - 2450 spx . Probably see him drop rates to zero , than negative as the Market continues in a downward spiral . Human Nature and Ego will not let this collapse happen on his watch , but it will , and than we can look forward to hyperinflation , no more bullets in the chamber , no more tools in the tool box .
+1 Reply
@Peterson, > Well what is surprising is we still have US rates doubling from here in our models before anything else to the downside. You are right to highlight 2350 in S&P as an area of value as we are reaching the end of the final chapter in this economic cycle. Powell is in a very similar position to Greenspan back in 1987 after the Reagan tax package in 1986 ... the key differences here come from Europe which is currently running narrower output gaps yet still withdrawing liquidity...
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Peterson ridethepig
@ridethepig, Also deposit growth ( which is directly related to central banks and in a downward trend ) seems necessary for a sustainable GDP and the Fed has stepped up QT in July and it is scheduled to intensify this month . I think they really believe that they can successfully manage a soft landing and hand this off to perceived strengthening economic activity . Of course they could always send signals of reversing and that would have huge ripples through the market .
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Yeah I'm tracking this one too, Great chart!
+1 Reply
ridethepig bubsymalone
@bubsymalone, Thanks for the kind words
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