The long bond’s yield pierces the limiters
We have had this very event on radar since we began projecting it as the Fed was inflicting the inflation upon the financial markets (to fulfill its goal of bailing out the ‘asset owner’ class) in Q1 2020.
This will be a decision point. The decision will be between an inflation like we have not witnessed before (von Mises crack-up style ‘Hellflation’ ©) or more likely in my opinion, deflationary failure of the inflation.
Sure, the yield is poking through the limiters. On 5 of the last 6 such occasions it did that too before reversing in-month on 4 of those 5 and a month later on the 5th. Every time into dis-inflation (at best) or eventual liquidation (at worst).
If you believe that a pattern like an Inverted H&S can work on a monthly yield chart (the long bond has logically broken down from a bearish H&S), well, that target is noted at 4%. Still, I lean deflationary as the history of this chart and the massively over-manned inflationary side of the boat offer a compelling proposition for a contrarian view. It’s a monthly chart, so it will take its time. Patience. Balance. Perspective.
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