Watching The Curve

From Bloomberg:

Treasury 30-year bonds reached a record yield premium over 10-year notes amid speculation the Federal Reserve will concentrate on purchases of medium-term debt as it tries to keep down borrowing costs.

The longest maturities, those most sensitive to inflation, also lagged behind shorter-term notes after the Fed said it’s prepared to ease monetary policy to keep costs in the economy from falling. Thirty-year bonds led declines today before the Treasury sells $21 billion of 10-year notes and $13 billion of bonds due in 2040 tomorrow.

“A tempering of the disinflation expectations and the expectations of the Fed buying shorter-dated securities is weighing on 30-year notes,” said Christian Cooper, senior rates trader in New York at Jefferies & Co., one of 18 primary dealers that trade with the central bank. “As disinflation has come off the table, it forces a reevaluation of where the back end should be.”

Ten-year yields, a benchmark for everything from home mortgages to corporate bonds, rose three basis points, or 0.03 percentage point, to 2.46 percent at 8:26 a.m. in New York, according to BGCantor Market Data. The 2.625 percent note due in August 2020 fell 7/32, or $2.19 per $1,000 face amount, to 101 14/32.

Thirty-year bond yields increased three basis points to 3.85 percent. The difference between the two rates reached 1.40 percentage points, the most since Bloomberg started tracking the figures in 1977.


Why am I watching the yield curve on the bond markets so closely?
Because I believe they are the key indicator of when we can anticipate the next crisis.

Unlike many analysts who are bearish on the dollar, I am becoming more bullish due to low sentiment levels.

However, if the Fed has its way, the dollar's future is not bright in the intermediate term.

The other chart I closely watch is the Gold to 30 year Bond ratio.
It has been rising rapidly the last 2 years and lately has threatened to go hyperbolic with its ratio climbing past the sky high level of 10.

For those readers that are skeptical that there will be a crisis, I ask them to consider how close the end came in 2008 by watching this embedded video.