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Ring! Ring! Goes the Long Bond Bell, Are You Listening?

The long bond has a message and inflation isn't it.
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US Treasury Yieldss Daily 2021-06-17

The long bond is ringing a bell and the message is not inflation.

Yield on the 30-year long bond fell 13 basis points today after holding pat yesterday when other yields rose across the board.

US Treasury Spreads

US Treasury Yield Spreads Daily 2021-06-17

Treasury spreads peaked around February 22. The 30-year long bond yield peaked on March 18 at 2.45%.

Many thought the long bond yield was headed up, up, and away never to dip below 2.0% again. 

One more move like today and we will be there tomorrow, but a pause after this move seems more likely.

 US Treasury Yields Monthly Average 

US Treasury Yields Monthly Average 2021-06-17

Asymmetric Policy

The Fed has an overriding tendency to hold rates too low too long. the slope and amplitude of interest rate moves tends to steeper and deeper down than up.

Dot Plot of Expected Hikes by Fed Members

Dot Plot of Rate Hike Projections 2021-06

By the Time

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The Fed has penciled in two rate hikes for 2023.  for discussion, please see Fed Will Foolishly Continue QE Purchases in Search of Higher Inflation

By the time they get around to hiking, they will instead be cutting.

Meanwhile, the way these dunderheads think, there will soon be some discussion about the need to hike just so they have "room to cut".

I rather doubt we get there. 

There is one slight problem. At 0% the Fed has no room to cut. 

Ring! Ring! Goes the Bell

Charts That Should Scare the Pants Off the Fed (And Probably Do)

Fed's Balance Sheet, Bank Deposits, Bank Loans 2021-05

Despite massive fiscal and monetary stimulus there is no demand by bank customers for more borrowing. I discussed that setup in Charts That Should Scare the Pants Off the Fed (And Probably Do)

Add this huge flattening of the yield curve and the decline in the long bond yield  to the list of huge Fed worries.


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