NFTRH+; Yield Curve

A snapshot of the 10-2yr yield curve this morning as long-term rates appear to be blowing off to the upside and short-term rates drop. In other words, bonds are getting hammered on the long end and bought on the short end.

As the 30yr yield smashes through our target in-month* it appears to be in unruly, impetuous blow off mode.

30 year us treasury bond yield

* It is important to distinguish ‘in-month’ on this chart showing monthly candles. Theoretically, the yield could put on this spike to where ever it is going and reverse in-month or within the Oct.-Nov. time frame and be painted in hindsight as an epic head fake and reversal.

But the main point of this update is the yield curve. It does not look like much and certainly is still in a flattening (inversion) trend. But it is notable that short-term bonds are being bought while the herds finish doing what they are doing to the long bond, which is stampeding away from it for fear of inflation and by extension, the Fed.

I continue to believe that the next steepener, whether it’s starting now or after deeper inversion, will be deflationary. My bones feel as though there is a massive lurch off sides on the macro picture and an interim (at least) deflationary period is still more likely than a ‘crack-up’ and uninterrupted inflationary future.

I have no idea whether this stuff interests you or bores you. But I have to tell you that I am downright geeked out and cannot wait to see how this resolves. It’s like the macro doing what you (I) thought it would do, but taking more time than the human brain can factor and parse on a daily basis. It’s amazing, actually.


This Post Has 6 Comments

  1. cjcall0809

    Exactly what I am feeling!! Especially concerning brain stuff!!!

    1. Gary

      Amazing, isn’t it?

  2. Mr.P

    Would love to see the 2-Year Note keep crashing, as I’ve been a monthly buyer at auction. But, alas, this could be it for a while. When to move out in duration? Ah, that is the big question (for this saver).

  3. Gary

    And a good question it is, if deflation is in the offing.

  4. Aaron

    The money is made at the major turns and no one is better than Gary at identifying them and keeping you patient and onside until it’s confirmed . It’s why I happily pay for this service year after year.

    1. Gary

      Thanks Aaron, I appreciate that vote of confidence. These markets are not easy and waiting for a real turn can be a long process.

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