you mean a bottom in yield...actually, if you look at the structure of the t-bond yield chart from the 6,7% high earlier this year, the decline in yield looks to be corrective...an a-b-c- in e-wave terms. and the second part of the decline looks clearly like a falling wedge, from which the upward break to the norm has now happened. that implies a return to the origin of the wedge, so i guess you could say they don't believe the inflation data.
or perhaps it's in anticipation of worsening data down the road....although as we all know the abilities of the BLS statistics minions regarding data tuning are unparalleled.
imo if the market is in fact losing confidence in the data, that would be extremely negative. once confidence is lost, it is very difficult to regain it.
as mentioned before, the supposed link between equities and the currency seems to be breaking down...it happened in Japan too. from '85 to '87, a huge break in the dollar coincided with a similarly huge rally in stocks in the US. whether a strong or weak dollar is perceived as a positive or not depends on circumstances...at the moment it is beginning to be viewed as a negative, as more and more earnings warnings contain references to the weakening Euro.
as for the bond market, it may be anticipating a break in the dollar down the road...if that were to happen, the export of inflation (or rather the import of deflation) would end. a weakening dollar would also against expectations lead to an even stronger rise in the external deficit at first, as trade volumes only catch up with a lag...again, in the '85 - '87 period the trade deficit worsened right until the eve of the BK in '87, in spite of the dramatic weakening of the dollar from its highs. |
