Yields & Macro Status

Last week these moderators were included in a post about the breakout in long-term yields and its implications…

“This week, assuming it is confirmed by remaining active through the FOMC next week, we got a short-term signal in Treasury bond yields that starts the clock ticking on a big macro decision point…”

[edit] It’s worth noting that if the breakouts in yields and TIP/IEF should fail, the timing of a deflationary episode could be pulled in.”

Last I checked, we still have the eggheads rendering their non-decision tomorrow along with the associated media hype. In other news the stock-pumper-in-chief is going to name a Fed head and consumers are the most confident in 17 years. It’s as good as it gets… until tomorrow when it gets even better!

Here is the status of the 10 & 30 year yields, with the breakouts at least temporarily repelled, but with the up trends from early September completely intact.

tnx

tyx

Meanwhile, the TIP/IEF inflation expectations gauge has remained buoyant this week despite the yield setback.

tip/ief ratio

Okay eggheads, time for you to leave rates alone, talk tough for December and maybe even firm a bit beyond that. The setup is in play. Consumers are in full frontal confidence mode, housing inventory is very low and inflation’s cost effects may not just tick up in a controlled manner across the economy.

For me, rising long-term yields would be the desired play because the macro plan would then seem clear for certain trends over the next weeks/months and then beyond that, the changing of said trends. But we’ll see, maybe the beautiful yield patterns above will end up failing. If that were to happen we’d need to decide between Goldilocks or a deflationary event sooner than expected.

I know it seems a little complicated, but really it isn’t. It’s more a matter of ‘if… then’, with a couple of twists (no pun intended).

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