LIQUIDITY’S LEGACY?

There may be a relationship between M2 money supply and the benchmark 10-year Treasury yield. Then again, maybe not. But interest rates are rising once again, and it’s time to round up the usual suspects.
On that note, may we suggest that money in circulation influences the price of said money? Yes, it’s true that such thinking has gone the way of formal dress at baseball games and putting tailfins on cars. But nostalgia beckons here at the world headquarters of CS, and so we provide a retro notion of what may be gnawing at traders in the bond pits these days…
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We’re the first to admit that there are more variables in heaven and earth that move the price of money, Horatio, than we could ever hope to quantify within a single post within these digital pages. Nonetheless, perhaps ours is a case that’s not completely lacking in merit. Consider that the real yield on the 10-year TIPS, which closed last Friday at 2.51%, is now the highest since last October.
We can debate the causes and the consequences, and whether the trend has legs, but there’s no doubt that interest rates are taking flight once more. Let the deliberation begin, with your host, Mr. Market….

2 thoughts on “LIQUIDITY’S LEGACY?

  1. JP

    Peter,
    Welcome aboard. There’s always room for one more in the choir. No guarantees that your editor won’t hit a few sour notes, however. But what we lack in genuine insight, we more than make up with the misguided hope that maybe, just maybe, there’s a few relevant clues lying around.

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