Monday, October 30, 2017

NDD on treasury market DOOOOOM

New Deal Demoncrat - treasury market DOOOOOM. Quote:

The top chart is the IEIs, which represent the 3-7 section of the treasury curve. The middle chart is the IEFs, which are the 7-10 year section of the curve, while the bottom chart is the TLTs, which represent the 20+ year section of the curve. All three fell through technical support yesterday; all are below their respective 200-day EMAs.

There are two reasons for this. First, the market believes Trump will nominate a more hawkish Fed governor, probably John Taylor. Second, the market is betting the Republicans will pass a large tax cut. Traders believe this will lead to higher growth and more inflation. Therefore, they are selling bonds, which under-perform in a higher growth, higher inflation environment.

Um, #2 only applies to idiot Republican traders who trade based on ignorant beliefs. The tax cut can't lead to higher growth and more inflation, because the Fed's duty is to respond to zero-unemployment growth and higher inflation with higher rates.

#1 is the only explanation.

Or, alternatively, traders have found somewhere else other than bonds to put their money into. Idiot republicans only came out of cash last November, so now they're probably running up the risk chain.

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