Yields, Inflation Trade and the Ongoing Boom

By NFTRH

Yields are up, bonds down again pre-US open, per Investing.com’s graphic…

This goes in line with inflationary signaling on the macro. Yesterday was an impulsive one for the ‘inflation trade’ (IT). Since the previous intermediate trend had been up before the recent consolidation in yields (bounce in bonds as fear struck the macro) continued strength from here would indicate a resumption of that rising trend in long-term yields.  Here are daily, weekly and monthly views of the all-important 10yr & 30yr US Treasury yield.

10yr daily…

10yr weekly…

10yr monthly…

30yr daily…

30yr weekly…

30yr monthly (aka our long-held big daddy of macro indicators, the ‘Continuum’ ™)…

While we are at it, let’s check some global yields as well (weekly charts).

German 10yr…

Japanese 10yr…

UK 10yr…

The situation above shows that US and global yields generally bottomed in mid-2016, which was when they finally got with the program and got in line with the ‘IT’ (assets benefiting from inflation). You will recall that in 2016 global monetary authorities were trying their damnedest to get the public to submit to NIRP, to actually buy bonds for safety and pay for the privilege. Most US and global yields have since been up trending as the dreaded deflation never materialized and the US is now under the authority of a regime that is going for balls out fiscal stimulation of the economy (i.e. they are wooing inflationary effects upon the economy and asset markets).

Introducing a chart that will attempt to gauge the situation but will probably only end up hurting your eyes, thus making you agitated.

What is interesting here? To me it is how the IT got going in early 2016 (after gold bottomed in December 2015 and led the party, silver and thus the Silver/Gold ratio (SGR) took over and led the charge) but the precious metals as indicated by the SGR topped out into a long consolidation now well into its 2nd year. What is also interesting is how the IT has decoupled very clearly from the US dollar over the last year. Yet another thing of interest? That would be the big spike yesterday in the SGR, which made a move to get the hell out of Uncle Buck’s dilapidated neighborhood. It has tried this before and failed (as indicated by the previous blue shaded box) but yesterday’s surge was very notable.

inflation trade

Bottom Line

Are you kidding me? You want a bottom line from this mess? Go see the guy at the other website who produces easy answers without showing his work. He’s got readily digestible answers. What I’ve got is a lot of indicators pointing in a certain direction but I also have my cart behind my horse as we move along through macro changes that may well turn out to be profoundly epic.

For now players are recovering their courage after the February/March whiff of risk ‘off’. Risk ‘on’ has regained its vigor (I know, because I took a loss on a Junk Bond short).

Folks, if the Continuum’s limiter (monthly EMA 100 on the 30yr yield) breaks the indication could be full frontal von Mises (inflationary “Crack Up Boom”). The signaling is headed in that direction. Interestingly, even as the Continuum approaches its limiter the Yield Curve flattens. It sure does not need to stop at the trend line. It can and probably will invert. But at some point long-term yields and inflation will fly up the economy’s tail pipe and the party will morph drastically, if not end. Speaking of endings, this started out as a simple look at yields so now that I’ve taken you down this twisted road, let’s end here but consider the macro as a whole moving forward. There is the potential for things that have not been for years, and in the case of yields even decades, to come into being.

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Published by

Gary

NFTRH.com & Biiwii.com