Even with the S&P 500 hovering at all time highs and currencies moving all over the place, Bloomberg's Richard Breslow says the only asset class that is dispositive right now is bonds. The 10-year U.S. Treasury is right at support. But support at pathetically low levels.
Despite strong retail sales, industrial production and core CPI last Friday, yields remain well below where they were before the U.K. referendum. Closer to historic lows than the average for the year.
There aren’t any Fed speakers scheduled this week. Be grateful for small favors. Although now that they’ve taken to Twitter, any stream of consciousness is possible. The comments that ended last week’s 13 Fed speeches, however, smacked of capitulation.
Bullard said he’s been “sliding a little more dovish” and Kashkari admitted “we’ve been wrong” on the data for the last few years. You know when they want to study lessons learned from the BOJ that they’re feeling lost at sea.
Lockhart didn’t tell Reuters that he forecast two hikes this year. Instead he limped in with “Fed might still eke out 1 or 2 hikes.” I wonder if the reporter wanted to spell it “eek?”
The comments made several times last week about their concern over a strong dollar were both disappointing and telling. It signals a lack of global leadership and comfort with the economy’s trajectory. They seem to think the dollar is an exogenous and unpredictable variable.
The latest meme — that the world will be saved by fiscal stimulus — is breaking out all over the place. Abenomics and Philip Hammond to the rescue. And then we’re greeted this morning to demands by the EU that Spain make EU10b in spending cuts. After all, 20% unemployment is the new normal.
Any true judgment of the economy will be reflected in bond yields. Given these Fed comments, it seems clear what they think.
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