Goldtent TA Paradise

2yr rates

1. pedro_deleon says:

   October 6, 2018 - 2:36 pm at 2:36 pm

   and here’s EW on the 30yr.

   https://twitter.com/TradingOnMark/status/1048635959053451264/photo/1

   One of the reasons I harped on the post below, re “Inflation to Drive Gold?” is the cause vs effect theme when you see rising prices. (Here, rising bond yields)

   If you took Micro 101 AND PASSED IT, you learned from S&D analysis that prices can change due to shifts in demand OR shifts in supply. So if you are seeing higher interest rates as we are … that means you are also seeing lower BOND PRICES (by definition). And lower bond prices can result from either … still with me? … falling demand for bonds/borrowing. Or falling supply of credit. Last figures I’ve seen on GLOBAL money supply are that credit totals are slowing and almost negative YOY. So quantity of credit has stalled. That suggests less credit on offer … terms are tightening. (And if you’re a bank, flattening yield curves remove the profit from lending … so no surprise .. that’s on Powell.) So, to circle back, that “feeling of inflation” (from rising rates) is instead “the reality of disinflation” — to play on that language — because the supply of credit is tightening, and its not due to growing demand from rising income.

   So note what you are FEELING, but do the analysis to trace it back to its likely CAUSE. Then when play out that cause …. see where things are headed. Feelings can be deceiving.

   • pedro_deleon says:

     October 6, 2018 - 5:00 pm at 5:00 pm

     PS .. left off some important details for those taking notes on the SUPPLY side of the bond market.

     The bond market supply curve shifting down … can happen in several ways.
     More bond issuance (than demand at current prices), or contraction in bond appetite relative to supply.

     So the “falling supply of credit” should be viewed in a net or relative sense … and in S&D terms, its a downward shift in supply to the right. Meaning too many bonds being offered and not enough takers at prior prices. So bond prices drop to clear the market. Some of this may be related to the recent proposal to make Household Tax Cuts permanent, with implications for future US federal budget deficits and the Treasury bond issuance schedule.

2. Highroller says:

   October 6, 2018 - 3:28 pm at 3:28 pm

   Good notes , thanks, Here in B.C the provincial gov’t is now supplying the down payment on a house for first time home buyers, talk about reeling in the last few before the slaughter. Baby boomers must come into play at some time in the future as well? I read some stats that in 20 yrs there will be only 2 workers per 6 retirees to pay the bills.Not to mention all the retirement accounts liquidating investment vehicles. In the end , why all the worry when all one needs is to live within our means, find that sunny beach away from the coffers hands.

3. Electrum says:

   October 7, 2018 - 4:02 am at 4:02 am

   great explanation pedro.thanks

4. Northstar says:

   October 7, 2018 - 4:45 am at 4:45 am

   Yep, cheers 😉