I don’t want to became a yield curve play-by-play announcer, but the spread flipped this morning in a lurch toward risk ‘off’ as yields drop with the 2′s dropping more. What’s it mean? Hey, these are manic, over played, over stimulated markets. It means what it means… for this little moment in time. I am just the play-by-play guy, not your Swami.
The 10 vs. 2 is, you guessed it, unfavorable for gold once again as it has been for a week now. The declining spread (2′s up harder than 10′s) indicates that risk is coming back ‘ON’ in the markets as people dump their liquidity safe havens in the 1-3 year realm.*
The good news for gold – should risk go ‘off’ again – is that it is no longer part of the ‘all one market’ syndrome. It’s a risk ‘OFF’ item, which is what it should be. Tune out the myriad rationalizations by conspiracy detectives and realize that gold is going nowhere until a counter cycle is indicated.
Yield spreads are flattening today, with both the 10 and the 2 up but the 2 up more. Today’s implication (again, let’s not take any single day outside of its bounds) is a lurch to risk ‘ON’ as money comes out of short-term T bonds faster than long term T bonds.
Where was the only place on the internet (or in finance in general for that matter) that you saw a down arrow placed on the 30 year yield amidst all the hoopla about a great rotation out of bonds and into stocks, with it being only a matter of time before yields went much higher?
That’s what I thought. Oh but wait, charts don’t work they say.
I’ve got the Continuum declining to about 3% to 3.2% or so before reversal.
Today the curve is up just a bit with both the 10′s and 2′s down in yield. With the 2′s down more than 10′s, the implication is that players are still lurching toward liquidity and risk ‘OFF’.
Here’s the state of the thing on the big picture at yesterday’s close…
Yields are up with the curve flattening in a gold unfriendly manner today.
The spread between 10′s and 2′s is widening again today and that is good for gold and not so good for the stuff most people cheer for, like the stock market and US economy. Again, I remind you that no one day should be taken in a vacuum, but this is now two days in a row of Yield curve strength strung together.
Yield spreads are up big this morning, with the 2 year down hard and the 10 not nearly so much. It’s a positive alignment for the precious metals and for the regular market? Not so much today…