Goodbye Mr. Bond?
AEP at Telegraph, Reflation threat to bonds as money supply catches fire in Europe... growth is going to take off and crash the bond markets? Goodbye Mr, Bond?
Upon further review, the Aug 27th ECB M1 release YOY% delta increase in monetary supply was average. However, it appears that ECB QE is having the same heroin like effect on Euroland as transaction turnover took a 2nd consecutive major MoM hit, declining from 92B to 65B to 37B.
Upon further review, the Aug 27th US Q2 GDP est. at +3.7. However, +3.1 was +85B in gasoline savings spent as PCE by cash starved (wages are not rising) consumers on automotive and durable goods one off repairs and purchases.
Every single scenario I have done a work out on, with or without a concomitant economic miracle or Fed raise, indicates a rise in short term rates and a decline in long term UST rates, possible inversion, TBD.
Nobody is selling T-bills or short duration, too much moneyness, not enough supply. If the ED contraction continues, less petrodollars, dollar keeps rising.
At a certain point, as a result of the higher dollar, what if China, EM's, Japan, are forced to dump even more of their long duration UST's or buy forward dollar swaps to defend their markets and currencies? Potential oversupply drives down price, raises 10-30 yr yield. Pricks both long bond market and US housing market? Probably not as a flight to safety from equities might counteract the EM's dumping 10 yr UST's
In any event, we know a massive flight from the dollar would cause global economic chaos. If they hang on to those bonds, then its a race to the bottom via debauch. Again, the dollar shoots the moon and we have, global economic chaos, either way.
Upon further review, the Aug 27th ECB M1 release YOY% delta increase in monetary supply was average. However, it appears that ECB QE is having the same heroin like effect on Euroland as transaction turnover took a 2nd consecutive major MoM hit, declining from 92B to 65B to 37B.
Upon further review, the Aug 27th US Q2 GDP est. at +3.7. However, +3.1 was +85B in gasoline savings spent as PCE by cash starved (wages are not rising) consumers on automotive and durable goods one off repairs and purchases.
Every single scenario I have done a work out on, with or without a concomitant economic miracle or Fed raise, indicates a rise in short term rates and a decline in long term UST rates, possible inversion, TBD.
Nobody is selling T-bills or short duration, too much moneyness, not enough supply. If the ED contraction continues, less petrodollars, dollar keeps rising.
At a certain point, as a result of the higher dollar, what if China, EM's, Japan, are forced to dump even more of their long duration UST's or buy forward dollar swaps to defend their markets and currencies? Potential oversupply drives down price, raises 10-30 yr yield. Pricks both long bond market and US housing market? Probably not as a flight to safety from equities might counteract the EM's dumping 10 yr UST's
In any event, we know a massive flight from the dollar would cause global economic chaos. If they hang on to those bonds, then its a race to the bottom via debauch. Again, the dollar shoots the moon and we have, global economic chaos, either way.
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