The situation is becoming increasingly intriguing. Recent revisions have revealed the largest gap between GDP and GDI (Gross Domestic Income) on record. What’s worth noting is that the last time we witnessed a similar gap was back in 2008, a year that carries significant historical weight in the financial world.
As Citadel’s Ken Griffin pointed out, we’re on the verge of seeing the real impact of certain economic decisions and policies play out. In recent weeks, the bond markets have been in motion, with 30-year Treasury yields experiencing a rapid increase from just below 4% to nearly 4.50%, surprising many observers.
But the question that arises is: why is this happening? Why is there such a notable surge in bond yields? Former Barclays CEO Bob Diamond suggests there’s very little chance that rates will decrease, and he believes the Federal Reserve faces a high bar to reverse its course. The context of a raging 9% inflation rate adds complexity to this economic landscape.
It’s important to note, though, that some anomalies have appeared in the data, particularly with the U.S. 2 Year Note Yield, which has reportedly jumped by 28 basis points to 5.31%, a level not seen since 2000. However, there’s skepticism about the accuracy of this data, as it may be a glitch rather than a correct representation of the situation.
This raises the question of how we arrived at a point where such data can even be considered believable. The U.S. 2 Year Yield appears to be signaling that there might be some unusual activities happening behind the scenes, reminiscent of events from September 2019. The possibility of Federal Reserve Chairman Jerome Powell interpreting any available evidence of inflation, genuine or contrived, is also a factor to consider, as the policy of “Higher for Longer” requires keeping some tools in reserve.
Sources:
THE PLOT THICKENS!
After revisions we now have the LARGEST gap between GDP and GDI on record.
The last time we had a similar gap?
2008… pic.twitter.com/UOgPpJA5i9
— AndreasStenoLarsen (@AndreasSteno) September 18, 2023
"We’re now at the point where we’re going to see the impact of these hikes really start to play out,” Citadel’s Ken Griffin has said. pic.twitter.com/4ZSikua637
— unusual_whales (@unusual_whales) September 17, 2023
Over the last few weeks bond markets have been on the move.
30-year Treasury yields have rapidly surged from below 4% to almost 4.50% catching many by surprise.
But why?
And what drove this bond market action?Thread.
1/
— Alf (@MacroAlf) September 17, 2023
"There's very little chance that rates will go down," Former Barclays CEO Bob Diamond has said.
"For the Fed to reverse course is a very high bar. With 9% raging inflation, the Fed was part of the cause of that." pic.twitter.com/2i6cHgqXXi
— unusual_whales (@unusual_whales) September 17, 2023
Multiple sources are showing the 2 Year Note Yield up 28 basis points to 5.31%, the highest since 2000.
However, this is a glitch and NOT a correct print.
How did we get to the point that this is even believable? pic.twitter.com/93UASIHMc7
— The Kobeissi Letter (@KobeissiLetter) September 18, 2023
U.S. 2 Year Yield is telling us some funny business is going on behind the scenes like September 2019. t.co/VA8a8EUDPl pic.twitter.com/qA5vQEOqLi
— Financelot (@FinanceLancelot) September 18, 2023
…unless Powell welcomes any “evidence” of inflation he can get and/or contrive. Higher for Longer requires ammunition in the chamber. t.co/69PPvhV9Ro
— Danielle DiMartino Booth (@DiMartinoBooth) September 18, 2023