The Bond Market Is Calling The Fed’s Bluff – Things Aren’t Looking Good

If bond holders expect an economic slowdown and deflation ahead, then they know the Fed will quickly reverse their tightening, begin cutting rates, and start buying bonds through another round of Quantitative Easing.

And when bond yields go down – that means bond prices go up.  

If this scenario plays out, that makes the currently not-so-profitable bonds suddenly very profitable. . .

Bond investors are the ‘smart’ investors – so if they’re calling the Fed’s bluff, it’s very concerningThese two revelations give us an idea of what’s really going on. The economy is too weak for more hikes, and the bond market isn’t buying into the mainstream medias growth story.

The 2 n’ 10 Rule shows that the yield curve is dangerously close to flattening – then soon afterwards inverting. And not even rate hikes, Quantitative Tightening, or rising inflation is enough to shake this trend.

Sorry, Mr. Bullard, but we’re calling your bluff. 

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The piece is from my original write-up at - All ideas expressed and charts are my own.


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Gary Anderson 1 year ago Contributor's comment

Long bonds are pricing in financial trouble. If inflation does not help workers and lack of inflation does not help them, helicopter money is the only answer.