Thursday, April 6, 2017

TrumpMania Hangs In The Balance

I will not speculate on tomorrow's job report. Based upon yesterday's ADP number it could meet or exceed reflationary "expectations". Of course if it doesn't, look out below. Regardless, what we are seeing now is that the long bond market is "discounting" the latest short-term data such as yesterday's hotter than expected ADP report. Why? Because long bonds are now betting that the Fed will implode the economy far sooner than any real inflation ever floats back from China. Hence short-term "reflationary" data is viewed as long-term deflationary.

Here is correlation between long term rates and short-term rates:

Refinancing collapse visualized
Oil with Junk bonds

"As analysts cheered the resilience of shale plays after the 2014 price collapse, nearly a billion barrels of Bakken oil were produced at a loss--about 40 percent of total production since the 1960s. Vast volumes of oil were squandered at low prices for the sake of cash flow to support unmanageable debt loads and to satisfy investors about production growth."


10 year

S&P Count