I Want to Come Back as the Bond Market
|The full text of James Carville’s infamous remark-- “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”—gets to the essential point. In a capitalist economy, the basic ingredient is money and the cost of funds. The bond market’s tempered view is likely to tell you more about economic probabilities than any other trading market. Equities have retained most of their post-election gains, the dollar and commodities have lost most of their Trump surge. The yield on the 10-year U.S. Treasury closed at 2.23 percent on Friday, much closer to the 2.61 percent post-election high that the 1.78 percent close on the Friday before the vote. Is this a judgment on U.S. economic prospects over the next two years? Or is it simply an acknowledgment that the Fed is embarked on a rate cycle and the 10-year yield is still less than half its 20-year average. What are the U.S. and global bond markets telling us about the health and future of the world’s economy?
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