Stocks down Treasuries yields up

The ten year is now 2.5%, that is almost a 1 point gain from a few months ago. Yet stocks are down a point.  The two year is .71%, and the one year is equal to the IOER.  Commodities, gold, copper, oil corn; all down A bit backwards so cash is king.

The hike in rates means Treasury is looking at a 40% rise in interest costs since a few months ago.  Jack Lew is now having to peddle a rise in the debt limit. Congress is facing a 6% rise in the budget to cover the expected interest costs. Likely the hyperbolic banking theory has the currency banks operating at a very high hyperbolic angle, it owns the entire yield curve; meaning they have all the liquidity. The Fed loan portfolio lost about 40% of its value, so Janet is little help on covering the extra interest costs with bond gains.

UK inflation rate is .3, annual; which is good, in my opinion, that means pricing accuracy. The derivative industry is doing a good job, but a good job is easier when rates are mostly determined by government debt flow.

The stock market seems to be in the meander period, Bulls banished. This puts a bit of a squeeze on public sector payrolls, especially here in California. Hence state government payrolls will be no growth.

Watch this chart, those interest payments are likely to rise above 500 billion a year in short order.   The full DC cost of the rate rise will be close to 1% of GDP.  That is deflationary. It is not clear that the private sector can generate those flows in a short time. One the full impact hits, Janet has a difficult decision, more QE? But will QE make matters worse in the short term if the bond market runs for cover? Here is what Jack Lew has to say:

CNBC: Unless Congress takes action, the U.S. will hit its debt limit on Mar. 16, but would begin taking "extraordinary measures" to finance the government on a temporary basis, according to the U.S. Treasury.

In a Friday morning letter to House Speaker John Boehner and other House and Senate leaders, Treasury Secretary Jack Lew said that his office will be forced to suspend the issuance of State and Local Government Series securities on Mar. 13 unless the debt limit is decreased.
"Accordingly, I respectfully ask Congress to raise the debt limit as soon as possible," Lew wrote in his letter.

Will Republicans add more to the debt pile?  One week to go before the Republican Communist Party shows its true colors.  Of course they will raise the debt limit.  Draining that much money is such a short period will depress growth from an already projected, YoY,  1.2% down below 1%.  That is a large negative QoQ change. It will be hard to recover and may very well get the Grey Bar by June or July. Deflation will extend another quarter, the oil drop is still working through the system and Congress is draining liquidity. So I have a hard time seeing any rate hike. The DC Swamprats are the economy's worst nightmare at the moment.


This is a bizarre moment.