After a week when everyone was focusing on the i) blowout in bond yields and ii) how much worse it could (and would) get, it got worse on Monday, when the 10Y yield jumped from Friday’s close of 1.34% to 1.39%.
Following a weekend in which the main news was “The Big Short” Michael Burry predicting Weimar-style hyperinflation, there have also been real-life indications of soaring price pressures to back up the market moves. Last week we saw 6-sigma beat in retail sales and PPI, hinting a scorching overheating in the US economy, while PMI surveys indicated record inflationary pressures. Even in Europe, the prospect of inflation is being entertained. It’s so bad that even sworn bond bulls such as HSBC strategist Steven Major abandoned his recommendation to buy U.S. long bonds, saying he “cannot ignore” the reflation trade.
Indeed, commodity prices were almost uniformly green on Monday with Brent rising above $63 a barrel as Goldman Sachs predicted prices could hit $75 in Q3. Shares of Jiangxi Copper Co., China’s top producer, gained 15% in Hong Kong, as copper soared above $9,000 a ton and approaching its all time highs, as investors priced in bets for inflation and economic growth.