Yield Curve Control, Whether Intended or Not [edit: Trump Tweets, Dow shears 300 points; high comedy]

[edit] I started a simple yield curve post with the markets very green and before hitting the Publish button see a red stock market on Trump tweets, about which I am not disappointed in the least, on resumed tariffs against China. I don’t like the guy, but that doesn’t mean I can’t like some of his actions.

The Fed’s action and words yesterday, disappointing to many given the adept global currency warriors the US is doing battle with, served to drive the 10/2yr yield spread down hard. From CNBC, here’s the up to the minute view…

yield curveyield curve

So is the play really going to be Trump’s desired reflation-friendly, US dollar compromising boost in inflation expectations or does the Fed have something else up its sleeve, like Goldilocks perhaps?

While that little bastard is running out of room to the flattening side, I guess we could go for the full inversion to keep Goldilocks going for a while. If the Fed’s aim is some sort of return to Goldilocks, temporary though it would be, they are playing it the right way by appearing stern in the face of the global policy rollover by its global central banking fellows.

The thing is, manufacturing activity and employment are weakening. That is supposedly what the greed heads in the stock market were cheering this morning. Whee! Manufacturing sucks and the Fed will resume cutting! The whole thing is comical, from the president’s Twitter account to the Fed’s mixed messages to the global currency warriors to the god damn algos flying every which way in response.

As for the effects, they temporarily screwed up my little curve steepener play (long SHY, long TBT) but in general the portfolios are recovering today. Not that I allowed much damage into yesterday’s fairly predictable ‘sell the news’ event. It is obvious though that the backdrop is still deflation-biased as the gold miners love it and commodities hate it, among other indicators.

Okay, getting too talky as the post was interrupted by events and I really should just stick to a focused subject because we are convoluting rapidly. Too late for that now and come on man, stop writing! Okay.

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