Treasury bonds after inflation data

[GordyG]

Hello,

The 10 year Treasury bond, and 20+ Year yield rose sharply after U.S inflation data came in inline with expectations.
On the same day though, you had the Presidential debate, and news of inflation rising in other countries around the world.
Some think a Trump presidency will be bad for inflation going up.

Bond price futures look to be strongly negative today.

Is the large rise in Treasury yields since the inflation data a sign that the market thinks inflation is on the up, even though inflation was inline?

Or is the fall in bond prices simply investors moving more into stocks due to the inline data and subsequent interest rate action?

 

[Real Money]

Just my take, and I'm out of touch cuz I'm currently fully invested (bills and RE). I'm guessing the banks/funds etc. are accumulating the physical, either speculatively for their client base, or for other reasons. So the market was bid up and was kept bid into the print to press shorts and force covering/buys at those (relatively) bid up levels (tactical selling here by mm's/bd's). The move higher (in yields) will setup the next accumulation phase.

I'm of the view that the street/banks/funds/etc. are trying to maximize liquidity at the upper range in yields here. They buying. The real pain would happen if we see a (significant) breakout in range on the long end. The % change across the curve is consistent with long end butterflies unwinding (the ratio of the liquidity take corresponds to the traded ratios).

TL;DR

The move is exaggerated to wash out weak hands in the steepener trade -- no real danger of yields higher from here.

 

[Nighthawk]

no real danger of yields higher from here.

I would be really cautious with this assessment. The master clown, called Donald Trump, will gift you with a priceless increase in tariffs on China and other "non-friendly" countries. Apart from what the clown plans to do with Ukraine/Russia.

Bloomi published this morning the below:

Traders Flock to a Trump-Fueled Bet on Higher US Bond Yields

• Open interest climbed sharply after the presidential debate
• Wall Street strategists have been touting the trade recently

https://www.bloomberg.com/news/arti...-on-higher-us-treasury-yields?srnd=markets-vp

 

[GordyG]

TLT up 1.3% right now.

I wonder how the falling money supply factors into this, after years of all the QE and pumping cash into the economy?

Falling money supply is generally a cause of deflation, and the yield curve is inverted.

How long can it stay inverted before a recession?