In deed.
Volatility, measured by the VIX index, is trading between 11 and 12 points’ level which is to be considered as very low !!!
Buy volatility !!!

Thank you for sharing David,
Looks like one of these ‘market-macro’ crossroads …
On the top of the yield curve, on should probably look at volatility.
Best regards,
Jacques

All this comes at the same moment where equity markets are stretched, 10Y Us Treasury are toping its secular bull market trend (2.6%), gold topped at $1265.- (200 MA), oil prices fell and found ground at $48.68 (200 MA).

This afternoon (Employment figures in the US) and the FOMC on Wednesday will be the major triggers for the next markets’ dynamic.

We qualify this precise situation as a “Pivotal Point”.

Best Regards,
David

Thank you for your comment Sébastien.

You’re right, inflation and economic expectations are on the rise and the bump might be temporary. As I read it you’re on the reflationary side. As discussed here let me challenge some of its rationale.

I see the recent reflationary trade as mix of oil rebound, improvements in global trade, a managed credit landing in China, aggressive fiscal guidance and buoyant animal spirits. I do not see these factors as an economic inflexion point however but a temporary relief. I believe it will struggle to counter much stronger deleveraging forces, i.e. a normalization of macro-credit (see here for instance for an illustration of oil as a credit variable).

I would put the legacy of excessive monetary policy on the top of this agenda to get an alternative reading of your reflationary trade: a credit risk repricing.

More to come about the impact of this scenario on the yield curve, happy to share.

Best regards,
Jacques

Thanks for the post. Economic AND inflation surprise indicators in positive territory for most regions… a rare combination over the past 10 years. As for now we are certainly feeling some sort of fatigue despite the latest signs of economic improvement. With best regards, Sébastien