Treasury’s and Inflation

10-Yr Yields sliced through the 3.55% resistance like a hot knife through butter despite good news that the gov’t was able to sell additional debt. Next resistance to look out for will be 4.1%. Two factors could send rates lower once again: 1) a return to risk aversion (which I believe will be the case); or 2) the Fed could make an announcement that it will increase it’s Quant Easing program. Whatever happens, letting rates increase will effectively make the housing recovery a failure.

Meanwhile, oil just keeps trudging higher on inflation expectations, not fundamentals and should set up for a large move down in the coming days/weeks.

Keep these market moves in mind though…we will see more of the same come the end of the year on our way towards commodity based inflation –stagflation.

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