Mish's Global Economic Trend Analysis |
- An Opportunity to Bet Against Treasuries?
- Treasury Yields Decline in Spite of Price Inflation; Mortgage Rates vs. Treasuries
- Food Prices Soar; CPI Posts Biggest Gain in 10 Months; Real Average Earnings Decline
| An Opportunity to Bet Against Treasuries? Posted: 15 May 2014 09:53 PM PDT I have been a long-end treasury bull this year for two reasons.
Curiously, Michael Novogratz, principal at Fortress Investment Group LLC claims Macro's Miss Was Shunning Long Treasuries Michael Novogratz, principal at Fortress Investment Group LLC (FIG), said most macro hedge-fund managers missed the biggest trade this year -- buying long-dated U.S. Treasuries -- and now there's an opportunity to bet against the debt.Opportunity Knocks? Novogratz says there is an "an opportunity to bet against the debt". Why? I can easily understand why one would not want to be long treasuries after this rally. Shorting treasuries is another matter unless one thinks the economy is poised to take off and there is no need for risk aversion. If the economy is slowing more than consensus targets or if a flight-to-safety trade in conjunction with falling equities is baked in the cake (I think both are likely), one would want to be long or on the sidelines, not short. There are always opportunities to do the wrong thing! Shorting treasuries at this juncture is likely one of them. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | ||||||||||||||||
| Treasury Yields Decline in Spite of Price Inflation; Mortgage Rates vs. Treasuries Posted: 15 May 2014 12:44 PM PDT Curve Watcher's Anonymous has its eye on the US treasury yield curve today.  click on chart for sharper image Chart Symbols
Yields Decline Today  The above table of US Bond Yield changes from Bloomberg. CPI Up - Treasury Yields Down With the CPI up more than expected, and with food inflation averaging 3% annually over the last three months (see Food Prices Soar; CPI Posts Biggest Gain in 10 Months; Real Average Earnings Decline) one might have expected yields to rise. Instead, yields fell. Why? The US economy is slowing more than expected. Lately, economic surprises have been to the downside. Mortgage Rates at 11-Month Low Bloomberg reports Mortgage Rates Dropping With Bond Yields at 11-Month Low A rally in the mortgage-bond market may send U.S. home-loan rates to the lowest in almost a year, bolstering a slowing real-estate recovery.Divergence Between Mortgage Rates and Treasuries There can be leads and lags in mortgages vs. treasuries but generally they are in close sync. 30-year Mortgage Rate  Chart courtesy of Bankrate. With home prices up and mortgage yields not dropping, home affordability is declining. Sales will follow. Expect household formation to stay in the gutter. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com | ||||||||||||||||
| Food Prices Soar; CPI Posts Biggest Gain in 10 Months; Real Average Earnings Decline Posted: 15 May 2014 10:15 AM PDT The BLS released CPI for April this morning. Data shows prices ticking higher with food up substantially for the third month. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.0 percent before seasonal adjustment.Food Breakdown Home vs. Away
Consumer Prices Post Biggest Gain in 10 Months Reuters reports Consumer Prices Post Biggest Gain in 10 Months U.S. consumer prices recorded their largest increase in 10 months in April, pointing to some inflation in the economy.Real Average Earnings Decline Higher prices in this competitive environment generally lead to falling real wages. Sure enough, the BLS reports Real Average Hourly Earnings Fall 0.3 Percent in April Real average hourly earnings for all employees decreased 0.3 percent from March to April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease stems from unchanged average hourly earnings combined with a 0.3 percent increase in the Consumer Price Index for All Urban ConsumersSuccess or Failure? The Fed is hell bent on producing 2% inflation. The Fed succeeded, but median real wages have not kept up. Obama's solution, now embraced by Mitt Romney and other prominent Republicans is to hike the minimum wage (see Mitt Romney, Tim Pawlenty, Rick Santorum Call for Higher Minimum Wage; Tweedle-Dum vs Tweedle-Dee) My solution is to stop all the manipulation by the Fed, by the president, by Congress, and by state and local governments. Such manipulation not only causes the wage inequality that nearly everyone moans about, it also has led to various bubbles of increasing amplitude over time. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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