Heed The Cry Of Negative Real Yields
Negative real yields are falling again, and getting more media coverage this time. Is the narrative shifting from inflation hysteria to stagflation anxiety?
Negative real yields are falling again, and getting more media coverage this time. Is the narrative shifting from inflation hysteria to stagflation anxiety?
Strangely, the long end of the curve has not responded as well to the Fed’s adjustments. The long end has actually moved lower, flattening the yield curve.
It’s been a week since the Fed’s hawkish June meeting. Now that the UST market has had the time to process the Fed’s changes, how has the yield curve changed?
Negative real yields mean that inflation is expected to be higher than nominal yields. This gives us a big clue as to why real yields are currently negative.
The inflationary spotlight has focused on data, nominal yields and breakeven rates. But little attention has been paid to real yields. What do they have to say?
Low Yields in 5 year Note auctions are lower by about 60 basis points since March. This indicates that the UST shortage is spreading to the rest of the curve!
Skyrocketing use of reverse repo with the Fed is a matter of collateral scarcity. Is this corroborated by investor demand at US Treasury auctions?
If you were offered an investment that returns -0.70% after two years, would you take it? No! Yet that’s what German 2 year bonds are trading for. Why?
What are the true consequences of QE? More frequent liquidity events, short term rates at 0%, dysfunctional repo, and a more fragile system; that’s what.
US 10y yields have become the nexus for inflation mania and the “boom times” narrative. But, are US 10 year Notes really as unloved as they seem to be?