Overnight, the US Treasury yield rose to 2.38% as the number of forecast Fed rate hikes rose to 8.211. So, enjoy “low” rates while you can.
If we back out the highest inflation rate in 40 years, the REAL 10Y Treasury yield is -5.50%.
And the REAL 30Y mortgage rate is -3.57%.
Of course, the meteoric rise in inflation is due largely to Biden’s attack on the fossil fuel industry (until Russia’s invasion of Ukraine distracted from Biden’s inflation fiasco). Remember, Russia didn’t invade Ukraine until February 2022.
Wait. I thought the purpose of Biden’s executive orders was to reduce dependence on fossil fuels by driving up gasoline and natural gas prices producing a shift to “green energy.” Won’t these “gas rebates” simply continue the consumption of gasoline and natural gas? And increase inflation??
As Winston Churchill once said, “Never let a crisis go to waste.”
Oil prices are soaring as US President Biden pleads like a homeless person to foreign countries for oil rather than let the US produce more oil to drive down prices. Meanwhile, the US Treasury yield curve 10Y-3M is at its steepest (rising 10Y yields while The Fed keeps short rates at near zero).
But if we look at the belly of the beast, so to speak, the 10Y-5Y slope, we can see that the Treasury curve has declined to a mere 0.278 basis points as inflation rages.
Bankrate’s 30-year mortgage rate keeps on climbing and has hit 4.55% as the 2-year Treasury yield rises rapidly.
The US Dollar Index has risen dramatically as US inflation has increased dramatically.
Oil? Oil is up over 4% in the US. Mexican Mix (not a #3 meal at Chuy’s) is up 7.32%.
Gasoline? NY prices are up over 10%.
Russian oil is up 9.35%.
Ah, for the good old days of 30 cents a gallon gasoline, although I always wondered about Gulf’s marketing campaign. “Good Gulf” seems to imply that the other Gulf gasolines aren’t good. And Gulf’s “No-nox” seems to imply that the other Gulf gasolines knock like Biden’s knees as he pleads for foreign oil.
The US Treasury yield curve (10Y-2Y) is rapidly approaching inversion at 20.5 bps (where the 10-year yield is lower than the 2-year yield). But the 10Y-3M curve is generally steepening at 173.33 bps.
Of course, the driving force behind the flattening of the 10Y-2Y curve is the rapidly rising 2-year Treasury yield (orange line). The last time the 10Y-2Y curve inverted was in 2019, prior to the COVID outbreak in early 2020.
The Wu Xia United States Federal Reserve Funds Shadow Rate has finally climbed back into positive territory.
At last look, The Federal Reserve is forecast to raise their target rate 7 times over the coming year. And with the increasing forecast of rate hikes, we are seeing the cryptocurrency Bitcoin fall from near $70,000 to $41,817.
President Biden announced that he will be issuing an executive order to combat rising energy prices (the rising energy prices that he caused in the first place with … executive orders). Let’s see what happens next.
“The data is basically screaming at us to go 50 but the geopolitical events were telling you to go forward with caution. So those two factors combined pushed me” to support the 25 basis points increase, he said. “Going forward that will be an issue whether to think about going 50 in the next couple of meetings or not. But the data certainly seem to suggest that we move in that direction.”
WIRP is pricing in over 7 rate increases by February 2023 as the Treasury yield curve (10Y-2Y)
Coindesk: The foundations of Bretton Woods II crumbled last week when the G7 seized Russia’s foreign exchange reserves, the investment bank said.
The Russian-Ukrainian war will create a new world financial order from which Bitcoin is set to benefit, according to Credit Suisse.
Zoltan Pozsar, global head of short-term interest rate strategy at the giant investment bank, wrote in a Monday report that Western sanctions on Russia are likely to cause a paradigm shift in the way the world organizes money and reserves, a “Bretton Woods III” kind of scenario.
“From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money, to Bretton Woods III backed by outside money,” the strategist wrote.
Pozsar argues that the fall of Bretton Woods II ensued last week as G7 countries decided to seize Russia’s foreign exchange (FX) reserves, leading to a rise of outside money – reserves kept as commodities – over inside money – reserves kept as liabilities of global financial institutions.
“We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West,” the report states.
Russia, a surplus agent in the financial system, can now no longer make use of the hefty FX reserves it accumulated through its commodity exports over the decades to defend its falling ruble or aid its local economy. Moreover, Russia’s ability to export its commodities has been severely hurt due to the “buyer’s strike” in the West.
“What we are seeing at the 50-year anniversary of the 1973 OPEC supply shock is something similar but substantially worse – the 2022 Russia supply shock, which isn’t driven by the supplier but the consumer,” the strategist wrote. “The aggressor in the geopolitical arena is being punished by sanctions, and sanctions-driven commodity price moves threaten financial stability in the West.”
Pozsar argues that while Western central banks cannot close spreads between Russian and non-Russian commodity prices as sanctions lead them in opposite directions, the People’s Bank of China can “as it banks for a sovereign who can dance to its own tune.”
“If you believe that the West can craft sanctions that maximize pain for Russia while minimizing financial stability risks and price stability risks in the West, you could also believe in unicorns,” Pozsar wrote.
As outside money keeps trumping inside money, this crisis will likely emerge and end differently than all others ever since Nixon broke off the gold standard in 1971 – which marked the end of the era of commodity-based money.
Meanwhile, US Treasury Secretary Janet Yellen said the U.S. dollar is in no danger of losing its status as the world’s dominant reserve currency as a result of sanctions imposed against Russia over its invasion of Ukraine.
“I don’t think the dollar has any serious competition, and is not likely to for a long time,” Yellen told reporters in response to questions following a speech in Denver on Friday.
Some commentators, including Credit Suisse Group AG interest-rate strategist Zoltan Pozsar, have warned sanctions that blocked Russia’s access to its foreign currency reserves could drive other countries away from the dollar.
Well, what Zoltan says may be true, but not so far. Bitcoin has been plunging since November 2021 as inflation keeps rising.
Zoltan: “..and Bitcoin (if it still exists then) will probably benefit from all this.” The US Treasury yield curve is listing towards inversion, a signal of impending recession.
Following the financial crisis of 2008/2009, The Federal Reserve began their dramatic purchase of assets such as Treasuries and Agency mortgage-backed securities (AgencyMBS). And then Covid struck and The Fed went berserk with asset purchases.
So, who benefited the most? The top 1% or the bottom 50%?
Answer? The top 1%. The share of total net worth spiked dramatically after the Fed infusion.
Even the bottom 50% benefited with The Fed’s Covid stimylpto, but no where near how the top 1% benefited.
World Economic Forum’s elitist Klaus Schwab approves of this message!
On an unrelated note, the US Treasury yield curve is strongly UPWARD sloping, while Russia’s and Ukraine’s yield curves are inverted and collapsing.
US rent inflation (owner’s equivalent rent of residence YoY) surged to 4.30%. However, Zillow’s rent index last month was 15.93% YoY.
But if we look at US Monthly Rent YoY, we see that rents are climbing at a 17.6% rate.
Energy costs soared in February YoY. Gasoline was up 38%. Fuel Oil was up 43.6%. Food was up 7.9%.
Volatility (AVAT) rages in the energy sector.
There are still 7 rate hikes in the cards from The Federal Reserve.
Gold has been climbing as Russia invades Ukraine. Cryptos Bitcoin and Ethereum are steady, even as the Biden Administration issues an executive order to “study” cryptocurrencies.
Confounded Interest - Anthony B. Sanders 
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