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Too Much Of A Good Thing
Rising yields caused further consternation in equities to start the new week, as bonds extended this year's rout.
At one juncture, the US 5s30s pushed near 158bps, the steepest since October of 2014. 10-year yields touched 1.39% before pulling back.
Some worry that the growth and inflation expectations now built into bonds and curves have overshot economic reality. That just underscores the risk to equities, especially with some parts of the market trading at extreme valuations.
Commodities
The blind seer from O Brother, Where Art Thou?
“You seek a great fortune, you who are now in chains. You will find a fortune, though it will not be the one you seek. But first… first you must travel a long and difficult road, a road fraught with peril. Mm-hmm. You shall see thangs, wonderful to tell.
You shall be on the 99th floor of a building in flames, all of you attempting to occupy an elevator down to the first floor at the same time, ha. And, oh, so many startlements.
I cannot tell you how long this road shall be, but fear not the obstacles in your path, for fate has vouchsafed your reward. Though the road may wind, yea, your hearts grow weary, still shall ye follow them down that shaft, even unto your salvation.”
Wow, all the way to 1.39%, the world will surely end soon. What is it with this? Have we completely forgotten actual “high” rates? My first mortgage was at 7.5% in 1970. My bonds were paying 7-9% for virtually the whole 1970s decade, much more for what I bought on 65% margin. If our current markets are heaven then how can 15bp blow them up? Come on, man!