One major factor to the slow growth/low inflation in the U.S. is the Wall Street Yield Trade. By incentivizing unproductive use of capital, low interest rate via monetary policy is actually deflationary.
China is unlikely to show weakness losing face in front of the international community, while it is too late in the game for Vietnam or even the U.S. to back out of the situation.
The interesting part is how the Econ Data and Central Bank events for the next three weeks all directly affect the next event, and how the market digests all these events as a whole.
It is very apparent the Fed literally are making policy up as they go along and Wall Street doesn`t realize that the Fed has no exit strategy. The learning curve is going to be painful as always for Bond Holders.
Since so many people are still slightly confused about how all the pieces come together in this move lower in yields, we feel the need to add some follow-up commentary.
There has been a lot on bond buying in Europe and that enthusiasm has transferred over to the US in anticipation of Draghi's massive bond buying stimulus program similar to that of the U.S. Fed.
With much hotter CPI & PPI reports the last two months, we anticipate the May reports before Fed's June meeting to be on the high side, and that the Fed will probably have to address these new inflation pressures....
U.S. demand for coal has fallen in recent years and export has become ever more important to domestic coal producers. Asia is the obvious export target, but challenges abound.
To compare Japanese and European bond yields in order to justify an argument for US bond yields staying historically low once the Federal Reserve is completely out of bond buying is a failed comparison.
The labor market is really starting to tighten and Thursday`s initial jobless claims coming in at 297,000 for the May 10 week is the lowest reading since May 2007.
