Stocks Surge As Yield Curve Crumbles To Fresh 11-Year Flats

Stocks exuberantly rallied on the 'hype' that the world is safe again and America's latest intervention is one-and-done... but bonds ain't buying it...

The curve tested Friday's highs then crashed back down its flattest levels since Oct 2007...

Someone is 'wrong' again!

As Eric Peters anecdotally summed up over the weekend...

"We have this global synchronized recovery, massive tax cuts, rising budgets, hurricane rebuilding projects, and record corporate profits,” he said.

“We have $70 oil, record low unemployment in the US, Germany and Japan.”

I nodded.

“We have the 2nd longest economic expansion and one of history’s greatest bull markets in US stocks.”

Indeed, it’s true, if America avoids a recession for another year, it’ll be the longest expansion since before the Civil War.

“Inflation is rising, core, headline.”


“So why can’t 10yr bond yields surpass 3%?”

Why indeed?!!


gdpetti Ouagadoudou Mon, 04/16/2018 - 10:35 Permalink

The correction seems long over, and the consolidation over the past 2 years seems to have pushed the MACD over the line into long term buy zone... been a long time coming.... but it still takes a while to pick up enough 'steam' to get this train up the hill... but each repeat in the cycle shortens that time...

In reply to by Ouagadoudou

LawsofPhysics Mon, 04/16/2018 - 10:21 Permalink

"bonds ain't buying it"...


Yes, that is because the only entity buying bonds are central banker/financiers...

ALL of whom should have their fucking heads on pikes.

FYI- this is a global problem, not just an American one...

"Full Faith and credit"

same as it ever was!!!

Salmo trutta Mon, 04/16/2018 - 10:26 Permalink

The time for stagflationist’s recalcitrance “will soon be at an end” (Gladiator).

See second verse, same as the first:

22 Luminaries (And Dick Bove) Sign Open Letter To Fed Demanding End Of QE2

N-gDp LPT targeting by stagflationist advocates is unwarranted and destructive. It has now produced, since the advocates banded together and wrote a letter to Janet Yellen, higher prices, a breakout in yields, a falling U.S. dollar, and a credit downgrade from China.

And after all this "irrational exuberance", stocks have declined into the 4th Elliott wave correction. The Fed acted and produced a “soft landing”?

There’s a very important lesson in the latest failed coup d'é·tat.

See the: “Secular Stagnation Project”

Larry Summers said in December‎: “And as soon as prices stop rising, the economy will lose one of its important props. Since the 1990s, he says, the U.S. has alternated between bubbles and busts.”

It’s once again, FOMC schizophrenia: Do I stop -- because inflation is increasing? Or do I go -- because R-gDp is falling? [Stagflation’s dilemma, viz., the FOMC’s policy mix]

And for the gold bugs, that transmogrifies into an inflation/deflation debate.

So in case you aren't tracking the markets, targeting N-gDp LPT, caps real-output, maximizes inflation, and exacerbates trade deficits (exporting aggregate monetary purchasing power, and importing underemployment).

The advanced change in thinking was pointed out and emphasized by Doug Short:

”However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place.”

Steve Keen's on to this: "Banks don’t “intermediate loans”, they “originate loans”.

"The fallacy in their thinking is easily demonstrated by looking at the two types of lending – from one non-bank agent to another (Loanable Funds or LF) and by a bank to a non-bank (Bank Originated Money or BOM as an accountant might call it)."

Keen: "A 'Loanable Funds' loan simply shuffles existing money from one person’s bank account to another: no new money is created (row 1 in Table 2). A “Bank Originated Money” loan creates a new asset for the Bank, and creates new money as well – which the recipient then spends."

No, savings never equals investment. Take the “Marshmallow Test”: (1) banks create new money (macro-economics), and incongruously (2) banks loan out the savings that are placed with them (micro-economics).

Thus, all DFI held savings are lost to both consumption and investment, indeed to any type of payment or expenditure. An increase in the proportion of time/savings accounts within the payment's system destroys money velocity. This is the sole source of both stagflation and secular strangulation. The remuneration of IBDDs exacerbates this disequilibria.

Frilton Miedman LawsofPhysics Mon, 04/16/2018 - 10:39 Permalink

Really, it is.

Corporate influence over the political system via campaign bucks assures continued "trickle down" tax schemes to deplete working wages & bolster CEO & shareholder wealth, then, the Fed periodically arises at each resulting recession to cut rates & make debt "affordable".

The banks, members of the Fed, remain profitable, it's win-win!....everyone wins!....right?

In reply to by LawsofPhysics

teutonicate Mon, 04/16/2018 - 10:28 Permalink

"Stocks exuberantly rallied on the 'hype' that the world is safe again and America's latest intervention is one-and-done... but bonds ain't buying it..."

They shouldn't be buying it.

So the failure of a false-flag-inspired attack to precipitate a new war for Israel moves the "market" to a positive demeanor.

I guess that if we fire a nuke at Russia, and for some reason it self-destructs due to a technical error before it hits, we should be making new highs.

Wall Street really lives in a bullish echo chamber, because valuation is irrelevant.

It is painfully obvious that this "market" is being propped up.

GooseShtepping Moron Mon, 04/16/2018 - 10:28 Permalink

The coming yield shock is going to completely blow everybody's brains out. We're talking real financial Armageddon here with no means of escape. This is what happens when a world predicated on growth....stops growing.

taketheredpill Mon, 04/16/2018 - 10:40 Permalink

Bonds should rally in advance of Fed rate cuts....BUT...once market susses that rate cuts will do nothing and that MASSIVE QE is coming then the bond rally is toast.  Likewise US$.

brian91145 Mon, 04/16/2018 - 11:13 Permalink

Let's face it... the FED will buy all of the bonds other countries are selling back until we achieve hyperinflation. The game is fixed, check the 1988 cover of the economist mag. Hedge accordingly