I can’t shake the feeling that we are at a meaningful juncture, as the yield on the 30yr Treasury bond continues to bounce. It’s still a daily chart downtrend, but it has had a bullish flavor for a while now.
But I am waiting for indicators like the KBE (Banks)/SPY (SPX) ratio to confirm. This morning, the Pigs continue to be locked down relative to the broad stock market. Said Pigs would be prime beneficiaries of rising yields with a steepening yield curve (see below), at least initially.
There would be a long way to go if the Fed is successful in wooing the inflation it so desperately wants to inflict upon us. This whole crash in yields, which began well before the Corona effing virus, is LICENSE to steal (i.e. counterfeit the peoples’ money supply through inflation, or printing funny munny out of thin air). It’s a picture of desperation and an entity with LICENSE and unlimited power to inflate will eventually get its way.
Importantly, the yield curve (10yr-2yr) has been steepening since August of 2019. Don’t sleep on the yield curve, folks. The combination of rising yields and a steepening yield curve means that discretion will be needed where investment destinations are concerned.
With nominal yields rising and the yield curve steepening the indication is inflationary. Now, if the bearish CRB index, the wobbling TSX-V and other inflation/reflation vehicles get on that message we’ll have a real inflation trade. First we probably have to endure a mega-noisy Q4 and its grinding markets. But 2021 is looking inflationary, and possibly big time inflationary before the Continuum chart above one day hits its (red dashed) limiter.
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