Market mumbo jumbo | Opinion


If this is the new normal, give me the old one back

Attempting to make market sense of the economic newsflow has been a 28-year struggle, though it is usually achievable, at least after the fact. But this morning’s attempt to try to explain a 6.7bp increase in 10Y US Treasury bonds has taken me to a place I didn’t think I’d ever go. In recent months, it has been possible to explain the decline in US Treasury yields as a reversal of tighter policy trades, which you can see in terms of the decline in USD OIS implied yields. Basically, if you take a very rough and ready approach to forecasting bond yields, you can make a case that the 10Y should bear some relation to peak Fed funds in a business cycle, adjusted for time preference and so on. That sort of works…It’s a variant of the envelope theory of interest rates if that rings any bells with any of you?

Today, while the newsflow from the US, on the whole, looks fairly supportive for the…

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