Fed Funds Rate, CRB & 2yr yield; a macro picture

2-year Treasury yield indicates rising Fed Funds to come

The link between commodities and Fed policy has been hit or miss (at best).

However, when you add in the 2 year yield, AKA the short end of the bond market that is directing the Fed, you can see a better correlation to the Funds Rate. Indeed, in 2013 (which you will recall was the beginning of the Semiconductor-led Goldilocks boom we managed at that time) the 2yr yield had been directing the Fed to raise the rate for 2.5 years before they actually moved. Commodities spiked again in 2009 and still they did not move as the 2yr yield burrowed southward. Commodities tanked and then they moved (in line with the ramping 2yr). Interesting.

Today the 2yr is in directorial mode once again and commodities have spiked. It looks sort of like 2004.

I am not going to form too many conclusions about this chart today but I am going to save it for NFTRH purposes and hopefully add more narrative to it as the macro moves along. I love charts like this, especially as they add color to the macro as we move forward.

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