Reflation ‘on’? The Pigs seem to think so

Let’s get through CPI tomorrow to see if there are any surprises to the view on the effects of the Fed’s printed inflation and the government’s pushed inflation. I don’t see how there could be a downside surprise but in this market, you never know.

Do the Gold/Silver ratio and USD know something we don’t? See something out ahead that we don’t? That is the issue I have before going whole hog on the resumed inflation.

The yield curve is on a similar message to the potentially bottoming 30yr yield we looked at this morning. I say potentially for two reasons. 1) because the trends have not yet turned back up in yields (although the major trend never was lost) or the yield curve and 2) because a yield curve can steepen under deflationary pressure. Today, the signal is inflationary as the steepening is driven by rising yields, not declining yields.

Here’s the 10yr-2yr…

yield curve

A couple weeks ago I added a position in the Pigs as a hedge toward a potential rise in long-term yields and importantly, the yield curve. I used KBE, shown here. It’s no surprise that it is aping its daddy just above and its other daddy, the daily 30yr yield from this morning’s post linked above.

kbe (banks)

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