“One Simple Reason The Yield Curve Is Collapsing”

Tuesday, November 7, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Nov 7, 2017

The divergence between the ‘hope’ melt-up in stock markets and the ‘nope’ collapse of the US Treasury yield curve has never been so wide… and has never engendered so many excuses by commission-takers and asset-gatherers for why the latter is wrong and the former correct.

One thing is clear, as The Fed tightens rates, the market is increaingly insensitive to the next tightening as financial conditions have eased dramatically as the Fed tightens. Former fund manager Richard Breslow suspects ‘you ain’t seen nothing yet’ as the linkage between FOMC raising rates and a flattening yield curve suggests this tradable trend is far from over.

Via Bloomberg,

The yield curve in the Treasury market has continued on its flattening way. Look at a one-year chart and it shows a relentless, if at times choppy, move from its widest at the beginning of the period to today’s new tight. Everyone seems to have their theories why and what it means, giving clear proof that great minds can differ. And even the bond market isn’t simply well-established science. One thing that they do agree upon is the obvious: it’s been a clear, tradable trend. But before we start waxing eloquent on the historic magnitude of the move, keep in mind, this tightening absolutely pales in comparison to several others of the last 25 years.

It’s perhaps been so confounding only because, for all the ink spent on it, it’s been relatively gentle and gradual compared to past episodes. And why should that be?

Perhaps because the FOMC has been raising rates at such a slow, methodical pace. And even then, investors continue to doubt the dots, despite December being taken as a given.

The Rest…HERE

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