In the past month, yield on the long bond bounced 23 basis points. Why?

(Click on image to enlarge)

There is no technical support nor technical basis for that bounce from 4.52 percent. That means it’s fundamental, or it’s a bounce for no reason at all.

30-Year Treasury Yield Monthly Chart

(Click on image to enlarge)

30-year long bond yield courtesy of StockCharts.com.

Ascending Triangle AI Overview

An ascending triangle pattern is a bullish continuation chart pattern formed by a horizontal resistance line and an upward-sloping support line. It shows increasing buying pressure, as prices repeatedly test the same highs but make higher lows. Traders look for an upward breakout above the horizontal resistance, confirmed by increased trading volume, to indicate the pattern is complete and the trend will likely continue.  

Technical Meaning

Technically, the expected pattern is for yields to breakout to the high side.

But technical patterns don’t always work. So, what are the fundamentals?

Fundamental Picture

Jobs are weakening dramatically. That normally would indicate more rate cuts on the way.

However, the Fed has a dual mandate on jobs and inflation.

Unfortunately, the Fed is flying blind. CPI data is missing due to the government shutdown. The October data release is likely to be cancelled.

If so, the Fed will not have CPI data for the December 10 FOMC meeting.

Data When?

The above information is from a BLS update so the dates are firm.

Note the reference period is September. That is data fully collected before the shutdown. We will not have those until November 20-21.

I expected the Employment Situation next week, but earlier.

Real Earnings is a PCE (not CPI) inflation report. But it’s also for September. I doubt we have inflation numbers for October at all (either PCE or CPI).

The CPI report for September was already released. And that provides clues for PCE, so expect no major PCE surprises.

Jobs Outlook

• ADP: On November 6 I noted Private Employers Added 42,000 Jobs in October, First Increase Since July
• Revelio: On November 7, I noted Revelio’s Realistic Assessment of the US Labor Market and Jobs – Sinking Fast
• Challenger & Gray Layoffs: On November 6, I noted Cost Cutting Hits Jobs. October Layoffs Surge to Highest Level in 20 Years
• Richmond Fed: On November 6 I noted Richmond Fed Survey Shows Small Businesses Impacted More by Tariffs

Today, I noted ADP Pulse of Net Private Job Creation Drops to Negative 11,250 Per Week

-11,250 per week * 4 = -45,000

That negates the first link above showing 42,000 job gains for October.

On November 13, I noted Fed Rate Cut Odds Dip to 50%. Market Throws Tantrum

According to CME Fedwatch, the odds of a December rate cut fell to 51.9 percent today from 62.9 percent yesterday and 95.5 percent a month ago.

This is not on any economic news that I can see. Rather it’s attributed to a statement by Sue Collins, a voting member on the FOMC.

“Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown,” Collins said in prepared remarks on Wednesday.

That seems a bit peculiar because the labor market is undoubtedly soft. What the Fed will not know by the December 10 meeting is what the inflation picture looks like.

Technical Plus Fundamentals

The fundamental (jobs + Fed statements) plus the technical charts creates an ominous-looking combined synopsis.

Q: What’s the combined take?
A: Stagflation

Once again, however, we are all flying blind, not just the Fed. I had a discussion with a friend on this today.

My Private Comments (Now Public)

The question at hand is not about weakening jobs. And weakening jobs plus stubborn inflation looks like stagflation.

But how long? I think it will be stagflation-lite, not long-lasting (at least in the short-term and possibly mid-term).

Q: Why?
A: Demand destruction from collapsing jobs, an AI slowdown, and continued tariff-uncertainty will sooner or later weaken the inflation impulses.

I expect sooner. Possibly, that’s why yields have not blasted higher already.

However, the long-term forces remain net inflationary. And the long-term chart shows that concern.

The deficit picture is a disaster and gold echoes that picture.

Gold declined today. Why? The short-term picture is the Fed may pause or slow cuts. That news should be good for long-term rates (but it wasn’t).

These are the competing forces. My view remains flexible, except on jobs where destruction looks huge.

Demand destruction looks to follow, and that should cool inflation (at least as measured).

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