Why Aren’t Bond Yields Flyin’ Upward? Bidin’ Bond Time Trumps Jay

It’s always something. There’s forever some mystery factor standing in the way. On the topic of inflation, for years it was one “transitory” issue after another. The media, on behalf of the central bankers it holds up as a technocratic ideal, would report these at face value. The more obvious explanation, the argument with all the evidence, just couldn’t be true otherwise it’d collapse the technocracy right down to the ground.

And so it was also in the bond market. Inflation and their yields very much related, the lack of the former wasn’t ever used to explain the curious absence of the BOND ROUT!!! No, the US Treasury market has been beset by its own set of “transitory” factors, too.

As ridiculous as some of the inflation excuses had been, Verizon’s unlimited wireless data plans the worst of this lot, those that have been offered for why interest rates clearly did have somewhere to go that wasn’t up have been even more absurd; even more divorced from substance.

In the summer of 2018, for example, yields were slightly inclined but in no way consistent with the inflation being talked about. Instead, curves were being distorted (eurodollar futures already inverted) as if some mysterious force was forcing the market to bid heavily on instruments the mainstream had been constantly warning to stay away from.

The Fed warning loudest of all; don’t ever fight the Fed!

Yet, someone at that time really was. A lot of someone’s. Thus, there had to be some arcane technical reason to explain this, otherwise, it would indicate very strongly that the Fed…perish the thought.

So, somebody looked at December 2017’s tax reform bill and said a ha!, I see it now! A tax break had given institutions an artificial window which, blah, blah, blah, you can read the details here. Suffice to claim, the bond game was up, this was the time when everything would turn itself right back up again, the very moment the “transitory” lid would be pulled off the bond market.

BOND ROUT!!! guaranteed for October 2018.

“One of the most powerful forces in the market place is this pension buying that is taking place,” said Tom di Galoma, a managing director at Seaport Global Securities…

“Every day for months now there has been steady buying of 30-year Treasuries,” said a trader at one large bank. “That goes away after September [2018].”

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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