Bond Market Exhaustion

FRI, AUG 16, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF FRI, AUG 16, 2019 • 11:58 ET

DJIA		25874.21
		+1.15%	+294.82

S&P 500		2888.96
		+1.45%	+41.36

NASDAQ		7892.81
		+1.62%	+126.19

EDITOR'S NOTE

I'm exhausted from the bond market action this week.

Looks like the bond market is, too.

The U.S. 10-year yield has edged up today to all of nearly 1.6%. The 30-year is back at 2.02%.

The proximate "reason" today is that Germany is reportedly ready to run a budget deficit if their economy collapses, according to Der Spiegel. What a relief.

I don't mean to be catty here, but quite obviously, a country with money to spend ain't gonna just sit on its hands if its economy is collapsing. This "news" was enough to send German bunds and global bond yields off their headache-inducing lows. Before these headlines, Germany's 10-year hit -0.75%. I can't even muster exclamation points for this anymore.

Germans have a right to feel frustrated. They're basically collateral damage from the slowing global economy and U.S.-China trade spat. Their economy is 50% export-driven. 50%!!! (Hey, the exclamation points are back!) The U.S., by comparison, is just 12-13%.

That said, we're obviously not immune to these issues. I'm not sure it warrants a 1.6% 10-year, but our consumer sentiment numbers slid this morning back to January lows. Why? The president's latest tariff announcement, for one. A third of consumers "spontaneously cited" the increase as a concern.

And secondly, the Fed! "The main takeaway from consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession," per Peter Boockvar. In response, those planning to buy a car or home fell to multi-year lows. Lows, after a rate cut that is meant to spur such borrowing activity.

The best thing the Fed could do right now, with its Jackson Hole meeting coming up next week, would be to tell the public the economy is okay and inflation is low and we simply hiked rates too many times! Instead, their confused messaging is confusing everyone, and the inverted yield curve is only heightening anxiety.

More at 1 p.m. See you then :-)

Kelly

Kelly Evans

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