Surge in Bond Yields Globally sparks RiskOff Move In Currencies; US personal Income Spending

Rates as of 0500 GMT

Market Recap

How things change! Yesterday the screen was all green when I woke up and I was asking for songs about green lights. Today? Its Red Lights by Tiesto. Nearly every stock market is lower, some by large margins the SP 500 2.5, NASDAQ 3.5, and this morning the Nikkei 3.7 and Hang Seng 3.1.

The reason of course is once again the bond market. For my younger readers, who may not remember Bill Clinton much less his campaign strategist James Carville, Ill repeat a quote from Carville, which is now one of the most famous statements in finance

I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.

Ive been talking about rising yields for several days now. So far though its been at the long end of the curve. What was important yesterday was that yields started rising at the short end of the curve, too.

Thats much more significant than a rise at the long end. A rise at the long end suggests that the market believes the economy will eventually recover and things will eventually head back to normal, which we all hope. A rise at the short end, such as the two or threeyear horizon, is a direct challenge to Fed Chair Powells statement Wednesday that it could take more than three years before the Fed reached its inflation goal of 2.

Thats because you can think of a bond yield as a series of shortterm…

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