30 Year Yield Continuum Predicted Yellen’s Inflationary Jawbone

June 25, 2021

Yellen says inflation and interest rates are “too low”.

Straight from the Bizzaro World comes Treasury Secretary Janet Yellen, wooing inflation and the higher interest rates that would attend it.

Higher interest rates would be good for the country, Treasury Secretary says:

We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” she said. She added that if the packages help at all to “alleviate things then that’s not a bad thing — that’s a good thing.”

So here is the thing. They jawbone, they jawbone and then they jawbone some more, depending on what it is they’re trying to manipulate or massage; what it is they are trying to have us believe.

In this case we have had but a little blip in the inflationary reflation as the 30yr Treasury yield topped in March and has consolidated in a slight downward manner since.

Evidently this is enough to prompt Yellen to utter what she would not have dared utter in March when inflation expectations were getting out of control. Ah, but the inflation trend is up, Janet. You don’t need to worry. It does not look like we’re heading for a deflationary resolution any time soon.

The expectation, per our longer-term ‘Continuum’ view of the 30yr yield (below) has been for a right side shoulder (currently in process) to be put in with rough symmetry to the left side shoulder. This after the yield rose exactly – as in right on the nose – to the bottom of the 2.5% to 2.7% caution zone we (NFTRH) had anticipated.

Here is a now public NFTRH+ update from March calling it in real time.

The bottom line is that the Continuum has dinged the lower bound of the caution zone and the closer it gets to the limiter (monthly EMA 100, red dashed) the closer the risk of reversal for the reflation trades. I say “risk” of reversal because the other option is a more painful inflationary condition where the economy does not respond as hoped by the inflaters. That would be the stagflation scenario and could be indicated by a break through the limiter (something that has not happened in a sustained way throughout the indicator’s history.

In stopping at the lower end of the zone the view is now for a more intense inflationary (stagflationary) problem coming up later in 2021 and of course now we have Yellen wooing inflation, as if right on schedule.

Talk about desperation, this little immature shoulder has policy/political types like Yellen out there touting the wonders of inflation again. The services-based US Good Ship Lollipop sails on with a cacophony of policymaker jawbone interference as usual.

Well, that’s all well and good for now. Inflation has eased a little lately and now they can get back to the business at hand, which is employing TMM (total market manipulation) as needed to direct the macro markets. Yellen and her fellow economic Eggheads know full well what happens if this thing slips its gears. What happens is that the debt pile – onto which they are piling more and more – is going to evaporate and never come back. Not under the current system, anyway.

The former Federal Reserve chair said the president’s plans would total about $400 billion each year — a level of spending she argued was not enough to create an inflation over-run.

See that people? The now political Yellen wants you to know that more printing (monetary) and spending (fiscal) will not create an inflationary over-run. I swear, they cannot even wait until the right shoulder matures before getting horny for more inflation (i.e. ongoing agenda).

But in the age of TMM, anything is possible. As inflation (as measured by breakevens, Treasury yields, yield curve and of course the public’s eyeballs looking at the higher costs at the pump, in the grocery store and increasingly all around) intensifies, they just employ more magic behind the scenes.

Like for instance, how mortgage rates are at record low levels despite a year of rising long-term interest rates.

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