Saturday, August 7, 2010

Did anyone notice the Yield Curve steepen? (Besides Zero Hedge)

Check out the Universal Economic Calculator,

Note the uptick in the 30 year bond?  That move was 1) an independent move at 30 years, and 2) an uptick.  What it all means is that inflation expectations have settled, and the settling process means that inflation hedges are set in the long bond.  I am not saying that inflation expectations are higher, just saying that the economy has reached a consensus on it.

This happens, mathematically, because common mode signals, once discovered, are delivered to the long bond.  The independent movement of a term in the yield curve implies the economy is close to an equilibrium. This is actually goods news in the sense that the economy is less confused.  But it may be bad news for economists who wished us to go backwards in time.

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