US Treasury Yields Decline Across the Board

US treasuries rallied today and gold went along for the ride as expected. 

  • 30-Year Yield: -4.2 Basis Points
  • 10-Year Yield: -4.8 Basis Points
  • 5-Year Yield: -2.9 Basis Points 

Gold and Silver Reacted Strongly

  • Gold: +37.80, +2.25%
  • Silver: +0.83, +3.29%

Small Speculators Pile Into Treasury Shorts, Is a Short Squeeze Coming?

Two days ago I asked Small Speculators Pile Into Treasury Shorts, Is a Short Squeeze Coming?

I offered this opinion: "I suspect a strong rally in bonds will soon wipe out the latecomers into these trades."

Inflation Meme

Nearly everyone bought into the inflation meme. And as discussed in the above link, it was small speculators leading the way.

Gold had been struggling on the notion the Fed would have to hike sooner. In isolation, rising yields are generally not good for gold, but there are other factors.

In Congress there is already talk of more stimulus but I suspect that is dead on arrival.  

It's not that I don't see inflation, it's I don't see a lot more of it as it is incorrectly measured. 

Bubble Talk

The Fed blew bubbles and they will pop.

If there is a sustained stock market decline or economic weakness yields rate to plunge. 

Moreover, everyone seems to have bought into the notion of Covid immunity and things soon getting completely back to normal. Even if so, it's already priced in. 

Technical and Economic Setup

So far, this is just a one-day reaction. If so, it does not mean much. 

However,  I suspect the rally in treasuries and gold just got started for technical reasons (short squeeze), and economic reasons (the reflation trade is way ahead of itself and bubbles will pop).

Three-Point Synopsis

  1. This economy is not as strong as widely believed
  2. Bubbles in equities and junk bonds will pop and that is deflationary
  3. Technical rally fueled by treasury shorts and gold bears

Mish

Silver Looking Better Than Gold?

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Gold and Silver Miners Outperforming the Metals

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Have US Treasury Yields Bottomed? Are You Sure?

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Spotlight on the Timing of Treasury Shorts

The lead-in chart, also posted yesterday, shows the progression of treasury shorts. Let's now look at yields and timing.

Hello Treasury Bears: About That 3.0% Treasury Yield Line in the Sand

According to numerous treasury bears, yields would soar out of control once the 3.0% threshold broke. Well?

Treasury Yields Surge, Curve Steepens, 30-Yr Yield Highest Since 2012: 6 Reasons

Treasury yields blasted higher today and the curve steepened as well. Let's investigate why.

Treasury Yields Surge: Crowded Bet a Winner for Now

Treasury yields are up across the board, with the 30-year bond approaching a breakout level.