The 10yr Treasury yield appears to be choosing its direction, breaking above the moving averages and hitting a new recovery high on the daily chart.
The 30yr yield is lagging, but also positive this morning.
If the 10yr is leading the 30yr and if they both continue to rise then we’d have the Continuum’s right side shoulder put in and a procession likely back to inflation and Stagflation. Let’s watch nominal yields and ‘inflation expectations’ gauges along with the anti-liquidity Gold/Silver & USD combo in the short-term in gauging whether or not the macro is exiting the cool down and entering inflation, part 2, including the Stag.
Remember, all that money printing that’s already been done contributes to rising asset prices including the prices of raw commodities and materials needed for many businesses to function. Rising cost inputs that outpace pricing power at some point when the tight economic supply rope slackens (eventually the pandemic-induced supply crunch will ease) could be economically impairing.
For now let’s watch to see if the yields follow through and if so, set about defining what’s upcoming near-term and longer-term. It is not always going to be as simple as ‘inflation is rising, buy commodities’. When the economy starts to fail cyclical materials, commodities and industries should come under pressure. At that time we will hopefully have an obliterated gold stock sector bottoming.
I am getting too wordy for a brief update, but let’s look forward to fleshing out the macro in the coming days and weeks.
