Bonds again diverge inflation headlines

Bonds up today despite alarming inflation headlines

The hysteria of the moment, served up as usual by the mainstream financial media off of backward looking data/results, has not resulted in bonds getting clobbered as would normally be expected. As was the case after last week’s CPI hysterics, Treasury bonds of all durations are positive today.

This despite the very real and concerning inflation data behind large retailers’ results (click the graphic if you want to read about the back-looking hysteria).

Meanwhile, as we watch an all-important decision point on the long bond yield’s big picture chart we note that the 30yr has not yet made a higher high to November, 2018.

I think there are decent odds that it will one day do so and end the bond bull now that the Continuum’s gentle downtrend (that has not so ironically enabled sublime levels of inflationary policy to be fire hosed into the markets at every sign of trouble) has itself been ruptured.

A viable play in the interim is for inflation to follow inflation signalers like this and top out. So far the long bond’s yield is doing as I thought it would do and holding below that 2018 marker (3.5%). Remember, when it was time to prepare for inflation in early/mid 2020 very few were doing so. Today, everybody is doing it and reacting to it in real time.

It’s what’s ahead that is important*, near and longer-term. The media report to you what is happening now. It reports the news. Market players need to look ahead and weigh potential outcomes. Short of 3.5% on the long bond, a failure of the current hysteria is still an option. Unfortunately, it might take some real stress elsewhere to kill or sufficiently wound the inflated beast.

* As repeated often, either deflationary failure or ‘crack up’ intensity of the inflation in my opinion.

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