The Bond Market Does Not Back Mild Inflation

If that were the case, why does the long term US government and corporate long bonds to gold ratio look like a ski slope? The gold market is sending a message that headline misdirection prevents many from seeing.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio:


Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Gold Ratio:


Historical comparisons and interpretations from nonstationary time series are useless. The aggressively devaluing U.S. dollar makes the bond market a nonstationary time series. Transforming the series into ounces of gold, the world’s premiere currency, reveals the true secular trend.

Headline: Bond Market Backs Bernanke Mild Inflation in Swap Forwards

In the U.S. bond market, the new normal is looking a lot like the old normal.

Interest-rate derivatives show traders anticipate economic growth that fails to spark runaway inflation even as global food and energy prices soar and the Federal Reserve pumps $600 billion into the financial system by purchasing bonds. Based on where they see 10-year swap rates in a decade, the cost to lock in fixed rates in exchange for floating interest payments is the same now as it was before the worst financial crisis since the Great Depression.

For DoubleLine Capital LP in Los Angeles, which oversees $8 billion, the worst is over for the sell-off that drove 10-year Treasury yields as high as 3.77 percent this month from 2.33 percent in October. The notes yielded 3.51 percent as of 10:41 a.m. today in London.

Source: finance.yahoo.com