The Fed’s fingerprints are all over the charts. Whether or not that is a good thing depends upon one’s point of view.
The yield curve still matters, in spite of former Fed Chairman Ben Bernanke’s 2007 assertions to the contrary. During testimony on February 14, 2007 before the Senate Banking Committee, the following interchange took place:
Fed’s policy trajectory is tied to global recovery from SoberLook. [biiwii comment: Agreed, in that there is little pressure implied on the Fed from global and ‘strong dollar’ perspectives. The pressure would come (IMO) from any desire to keep up appearances considering that ZIRP appears to the average person to be stranger and stranger given the ramping economy. Anyway, SL as usual has the grounded and sober details].
Fear not my dear bulls, help is on the way in form of a moderating yield curve. Well, from this snapshot view at least. Indicators are flying around at warp speed and if you do not love this market (speaking as a geek) then you will never love any market.
10, 5 & 2 year yields are aligned up for the yield curve today with all maturities heading down nominally.
For a visual, here is a look at the longest end (30 year) to the shorter end (5 year). Interesting to say the least, as are so many markets right now.
A declining yield curve has been one of our main reasons to support the strong economy/strong stock market (and cautious gold’s price) stance for about 1.5 years now. So, what do you think the above means? Probably just a little blip? Yes, probably… but.
Checking in on the Continuum, we see that the ‘would-be’ support zone wasn’t… or at least isn’t yet. So much for the Great Rotation pumpers of the year ago time frame.
Today’s stock market bounce was fully anticipated. But it will be in the indicators (and the TA) that we confirm its nature going forward. A lot of those indicators take place in T bond land.
The yield curve is spiking up today with nominal yields falling, but if it has anything to do with this new Ukraine stuff it is meaningless as a risk ‘off’ indicator. Anyway, here’s the view of the herds jumping into short-term Treasury instruments.
Here is the big picture view of 10’s vs. 2’s as of yesterday’s close. As you can see, it is burrowing southward on the big picture with its combined message of no inflation and no systemic risk… That’s what it says as of 11:00 Eastern US time on Wed. the 1st of October, anyway.
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.