Yield Curve: Peak Fed? [w/ edit]

As per one of my favorite ‘not taking the analysis too seriously’ market memes…

…we note that global casino patrons are good and pissed, scared and downright apoplectic. Especially overseas as the US exports inflation to the rest of the world with the delivery vehicle being the chronically strong US dollar.

The Fed is in control. All eyes on the great monetary authority which shall dominate your life (and pay you some risk free income) until their control peaks out.

The yield curve is one measure among several that advise we are now at ‘peak Fed’. Just sayin’…

Here’s the daily 10-2 yield curve inverted to beat the band.

The depth of the inversion is something not seen for over 2 decades.

One interpretation of the inverted yield curve is that the Fed is in total control as policy is tight and the bond market appears to believe 100% in the Fed’s powers. The Fed continues to follow the short end of the bond market, which is raising the fight against inflation (yields) above yield concerns on the long end.

Risk/reward clearly states that we are at ‘peak Fed’ now. Indicators like the above can grind around for months, but changes they be a comin’.

[edit] Subscriber ‘RM’ sends along this longer-term view from the St. Louis Fed showing what happened at the culmination of the 1970s inflation problem. He also sent along other interesting and detailed viewpoints. But this chart puts another perspective to my charts above. It’s funny, I’ve been thinking about macro correlations to 2000-2002. But if the inflation (or at least the bond market’s perception of it) persists and continues to flip the bird to the hawking Fed, I could imagine a 1980 yield curve scenario eventually unfolding.

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This Post Has One Comment

  1. MikeC

    Things always fly higher and fall further than expected, don’t they? Patience has been very useful the past few weeks. But I still sort of hate gold.

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