Macro & Market Indicators (NFTRH 419 Excerpt)

Here are some clips from NFTRH 419’s Macro & Market Indicators segment.  There was a lot more information and interpretation in the original segment and the report on the whole, but I think this gives a good picture of what is going on in the macro with respect to the possibility of an inflationary phase, as indicated by Treasury bond yields.  The indicators are not yet conclusive, but are heading in a direction that would signal a developing inflationary phase.

Last week the yield curve made a new high and closed above the 200 day MA. If it now goes on to grind out a hold above the MA 200 we would soon be talking trend change (and all the pain and glory that could come with a rising curve).

yield curve

Global (especially US) 10yr yields have been rising since June and so the message of a rising yield curve would be inflationary, not deflationary.

global bond yields

10 and 2yr yields are out of the barn, with respect to the 2016 downtrend. This is not ultimately bearish for gold (or commodities necessarily, if the economy holds up), as we will hear in the media, if the 10’s rise faster (ref. rising yield curve).

10yr and 2yr yields

We will keep this big picture view as a periodic reminder of when risk would become very high on any ‘inflation trade’ that pops up in 2017. If the ‘Continuum’ rises to around 3.3% or 3.4% while the media go nuts over inflation, it will be time to step away.

30 year bond yield

With the interest rate dynamics in play, the Pigs continue to slop around at the feeding trough. Banks are bullish, gold is still corrective. But this may become an environment in which they can coexist. I bought NFTRH+ highlight the Vampire Squid (GS) last week instead of buying back a Banking ETF. Many Financials and investment banks like rising yield dynamics as well.

bkx and gold

TIP-TLT continues to point inflationary.

tip-tlt ratio

When might inflation expectations actually start to make a difference?

10 year breakeven rate

The 10yr Breakeven Rate (St. Louis Fed) “represents a measure of expected inflation derived from 10-Year Treasury Constant Maturity Securities and 10-Year Treasury Inflation-Indexed Constant Maturity Securities.”

That’s the gobbledygook. The reality is that the 10yr b/e has broken a (green) neckline of sorts and if or when it breaks above the convergence of the black downtrend line and the red resistance line, there would be little question about the macro backdrop (i.e. inflationary vs. deflationary). We will keep watch.

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