Home » United States, the crazy Treasury week that reopens the Goldilocks scenario

United States, the crazy Treasury week that reopens the Goldilocks scenario

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A short but intense week, in the States United, has complicated the lives of analysts and investors with volatility spikes on Treasury and reopened the doors to a scenario of tipo Goldilocks, that is, one in which economic growth is moderate and inflation remains low. This view was envisaged in particular by the report by Mirabaud AM.

Doubts about the Treasury rally

In the last days, therefore, in America an improvement of the data cheap, which have probably reached their peak. L’inflation it is still assessed as transitory and rising interest rates appear to be able to guarantee less risk with regard to future price increases. But the big question this week was about why i Treasury they went in rally in the face of rising inflation and consolidation of growth.

Understanding the economic outlook

In fact it is not that important what you think of the peak of growth orinflation transitory – i Treasury should they rally with the stocks and on what values ​​should they trade at this point? THE real returns are incredibly important, and as we have moved in a more negative direction, inflation expectations have dropped significantly. Are we really at the beginning of a new cycle or was the COVID crisis just a break in the last cycle? Understanding this is important for grasping the prospects of the economy. It would appear that the Delta variant is signaling a slowdown in growth, further quantitative easing (or at least the absence of tapering) and an increase in buyers of government bonds.

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The return of the Goldilocks scenario

When only a few months ago the Treasury USA at 10 years it reached a yield of 1,80%, there was discussion on how much the ten-year would exceed the 2% threshold. Now, however, we have returned to discuss the moment in which it will again reach the1%. The market consensus reflects the belief that a slowdown in the economic recovery, combined with fears about the Delta variant, means less tapering. There are contradictory elements in this picture, but at the moment this does not seem to matter. There are obviously broader implications for the US dollar and risk assets – and it looks like we’re back to the Goldilocks scenario.

Markets and detachment from reality

According to Bloomberg, i returns of Treasury a 10 anni they fell for eight consecutive days: something that had happened just “less than 10 times in the past two decades”. However, a nine-day decline had not occurred since March 2000. Interestingly, the only factor that stopped the downward pressure on yields was the new one offer of securities at 3 and 10 years, Monday 12 July, when i $ 38 billion poured into the market were sufficient to reverse the trend, at least in the very short term. The latest published US Consumer Price Index data (13/7/2021) was also read as transitory – used cars okay, but housing? It seems the market is increasingly distant from reality, but with limited supply and the Treasury continuing to buy, there have been strong technical elements behind these changes. It remains to be seen whether we will now see a gradual return to more normal levels, even though we have seen peak growth.

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