Global Factors First: Was There A US CPI Today?

You just cannot account for this in the “too much money” sense, the same which has been incorrectly alleged as a key contributor to the huge inflation numbers. With the Fed buying up a lot of the best collateral, and Treasury issuing fewer of the best of the best, what must be left for a system where now half a trillion seeks out RRP at zero?

If it is collateral concern/scarcity, and it almost certainly is, no wonder the US CPI hasn’t made a dent in the falling yield trend despite two huge reports in a row.

But I don’t think that’s the end of the collateral problem, either. I believe there is a looming other factor that seems to be gaining, too. This might end up being the greater of the three over enough time. Writing elsewhere for tomorrow:

On top of those, risk aversion has rather quickly crept its way back into the general global marketplace as economic circumstances more and more fail (yet again) to resemble the inflationary narrative; in other words, it isn’t just Treasury yields which are falling since March, nearly every major market around the world has reversed away from reflation with several key places, such as Japan’s JGB’s where their QQE is still ongoing, too, putting in new multi-month lows along with UST’s just this week.

Is this the perfect collateral storm?

Look at the global bond market; multi-month lows all around, especially Japan and Oceania. Even German bunds have turned right around after having been the lone reflationary bright spot over the past three and a half months since the (Fedwire-induced) inflection.

If, say, I don’t know, China’s economy really is rolling over hard perhaps more quickly and forcefully than has been anticipated, this would account certainly for JGB’s as well as yields Down Under.

Global factors certainly matter because inflation is a dollar therefore global consequence. For these reasons, collateral as well as others, the market is looking ahead not as if the existing money and growth regime has been flipped upside down as all recent inflation data might propose, rather falling yields in spite of all these various CPI’s and PPI’s are concluding with greater certainty how nothing much has really changed.

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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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