Here some commodity and fixed income related reports.
Watch both markets very carefully here.
The UST is back over 2.8% at 2.86%. She is reaching a danger threshold area feeding into US mortgage rates etc.
The spread to junk is at extremes. The text book case is that rates rising are usually correlated to cyclical performance, during a standard economic recovery. But, I alert you to an important non confirmation of this at present. Rates rising are usually correlated yes to performance of the cyclical stocks and also rising inflation. Inflation is instead falling and not rising at all. This is not what is mean to be happening 5 years into a recovery. Commodities look sick and many have chart breakdowns at present.
Are the commodities sending us a signal that we have inflation in financial asset prices alongside real demand destruction as money velocity declines further?
If demand destruction is occurring financial asset prices will eventually mean revert and likely by asset prices sliding badly I’m afraid.
For now lets enjoy the seasonal ‘good will’.
Commerz-CommodityWkly-03-12-13
Rich