The tiny little bounce continues as the curve rises again today, with all maturities declining. A little risk off’y here.
May as well throw in a couple other indicators while we’re at it. TIP vs. TLT indicates that a little counter trend support could be setting for a bounce in precious metals, commodities, etc. Depending on what USD does with its over bought status. Junk bonds are weak but still showing a bullish hint vs. Treasury (and Investment Grade) bonds.
The yield curve rises today as nominal yields rise as well. Implication, when taking into account the TIP-TLT ratio in the previous post is that risk is still ‘ON’ (also see junk vs. T bond spread below) and that a new squall of market bullishness – if it materializes – can include a commodities/precious metals bounce. *
Here’s the HYG-TLT ratio.
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* Look guys, I realize that many precious metals and even commodity/inflation players are enthusiastic sorts, to say the least. So when someone speculates about something short-term bullish amid a growing pervasive bearishness please filter it with the other more moderating language in these posts and with the fact that intermediate picture technicals are bearish. Okay?
[edit; normal yield curve snapshot post goes on and on, gets a little weird] It may be silly to keep posting the daily Yield Curve moves, since it’s probably just a reflection of black boxes and whatever knee jerk they are programmed to do on a given day. Today the black boxes are risk ‘OFF’ing it as the curve rises.
Why, today we have the dreaded geopolitical tensions and rate hike fears as noted by a robot in the media. There is also a jobless claims number that was higher than expected, which you would think might counteract the rate hike fears, when taken along with the recent non-stellar jobs report.
Of course it’s all just rationalization to come up with a story every day about why the market is doing what it’s doing on that particular day. Here is some reasoning… markets are going up. Money is and has been pouring into them and it will continue to do so until something reverses that impulse.
The 10 vs. 2 yield curve, of which the above is a daily snapshot, has been dropping for like, forever. Or so it seems. That’s not a snapshot, it’s a trend and it has been good for the financial system and the stock market. All the while ZIRP has been maintained as much of the 2014 policy tightening furor has centered on QE’s removal. It’s all good for the market until the curve reverses trend.
Right now that trend is no systemic stress and no inflation. The Yield Curve says so! Meanwhile ZIIIRRRPPPP whirs along and the machine hums along.
Risk is still ‘ON’ by this measure, though you wouldn’t know it by looking at junk bonds or the stock market the last couple of days. But today the Yield Curve is dropping with yields rising… it’s a risk ‘ON’ signal. What can I say? It’s a snapshot.
Wax off, wax on… risk ‘OFF’, risk ‘ON’… the curve is dropping today in a risk ‘ON’ manner even though markets are down. Of note however, is that the HYG junk bond fund is losing a support level (@ the MA 50) today. It is also negative vs. TLT and LQD to put the cherry on top of a thoroughly confusing market. No really, it’s a because every day we breathe the air and are privileged enough to do this is a good day.
Anywhere, here are the yields doing their thing…
A hard bounce in the curve and unlike the other day when it dropped hard while all yields rose, yields are dropping across the board. This is a positive condition for gold and a negative one for the stock market. The caveat of course being that it’s just a momentary snapshot in time.
Folks, this is a barn burner of a rush out of T bonds. With yields launching like this we should note that the the curve is actually declining as people are getting the heck out of short-term bonds faster than any other kind.
So you can see that this gold negative alignment is only becoming more so today. Here we recall all those continually telling us how bullish gold’s fundamentals are and then we recall that this here spot on the internet has been calling them ‘not fully baked’ at best, with the yield curve (and strong US economy) being among the most bearish funda’s on gold.
As for the regular markets, this is a risk ‘ON’ picture, so we’ll have to see how things go there. I have been wondering how long the stock market can rise with inflationary expectations going down the drain but interestingly, the TIP-TLT meter is popping today in opposition to the commodity wipe out. Yet with both TIP and TLT down nominally, it may not mean much. Weird and complex market right now. I guess summer play time is over.
The 10-2 yield curve is dropping hard today implying risk is very much ‘ON’, all is well in the system and inflation angst is nowhere to be found. It’s a beautiful day today!
Today the 10-5-2 year curve very gently rises on the expected market relief.
The 10, 5 & 2 yield curve is rising sharply today as nominal yields get plunked on jobs and whatever other noise is out there in the MSM. This is gold positive.
The 10→5→2 year curve is what you’d expect; it is dropping with nominal yields rising on GDP surprise day. The implication is risk ‘ON’ and clear sailing as far as the eye can see. See that Janet? What could go wrong with a little rate hike chatter today? Have confidence in a job well done!