EDITOR NOTE: The markets were temporarily derailed yesterday as investors, spooked by an alarming rise in the pandemic’s new delta variant, ditched stocks to seek safety in bonds. The Dow plunged as much as 900 points, while not even bitcoin, gold, or silver were spared in the selloff, though the fall in the metals wasn’t as steep. Meanwhile, the Fed’s balance sheet remains sky-high, as is the case with other central banks across the globe. As compared with the 2008 financial crisis, and the doom and gloom warnings in response to the monetary easing that followed, current QE is now off the charts, its outcome being “unprecedented,” a term that’s too tame to capture the uncertainty permeating throughout the economy. We’re standing on a narrow ridge with a steep cliff on each side--one representing a steep drop in purchasing power, the other, a steep drop in market values.
US Treasury 10Y-3M Slope Declines As Dow Drops > 900 Points As German Sovereign Curve Negative Out To 25 Years
As fears of the Covid Delta Variant sink in, we are seeing a flight to quality. The 10Y-3M Treasury curve slope is declining.
But the US Treasury actives curve remains upward sloping as does the on/off the run curve.
While the US Treasury curve (green) is upward sloping and all yields above zero, Japan’s sovereign curve is negative in tenors of less than 10 years. Germany has negative sovereign yields for tenors less that 25 years.
The big three Central Banks are expanding like crazy.
The Dow in down > 900 points
Graphically, the Dow is dropping alongside 10Y Treasury yields as investors flee to quality.
Paging Fauci for a lecture of Covid and more “go big” talk from Treasury Secretary Yellen.
Original post from Confounded Interest