This morning the US 10 Year Treasury Note yield has slipped convincingly below 4.0% for the first time since last October. The 10 year has quickly shed 0.3% in the last two weeks, which is welcome news. But its movement is asynchronous with other Treasuries and the greater bonds market yields, which are comparatively lethargic. Mortgage Bonds for example are at four year lows, but the momentum is more calculated if not downright sluggish.
The interesting thing to me is that the data being released does not warrant the velocity–or even the generalized direction–toward the lower yields. Today for example the Producer Price Index rose 0.5% over last month and is up 2.9% from this time last year. The market was expecting only a 2.6% YOY increase. So today’s reading demonstrates that inflation is back on the rise, which should lead to higher, not lower interest rates.
A few weeks ago I mentioned this growing disconnect between the presented headlines and the subsequent calculations from trailing empirical data. Our rising intellectual prowess should make extrapolations more accurate, not less so. On one level it’s disconcerting that the numbers in the press are awry. To be fair, that could be a result of the initial automated models getting the calculations wrong and not intentional deceit. After all, the federal agencies publishing this stuff face budget cuts about every 15 minutes, so maybe it’s a GIGO problem.
On the positive side, this trend in the markets for money to move based on the underlying market sentiment and not merely circulated statistics, means that the robots have not yet taken over the world. Go humans.
