The People’s Economy
May 14, 2021
–Yesterday PPI was released at +6.2% with Core 4.1. The thirty year bond auction went off at 2.395. Fortunately, the two have nothing to do with each other. Today we get Retail Sales expected +1.0% and U of Mich inflation expectations survey with the one-year rate expected 3.4% and longer term 2.7%. Yields actually fell across the curve yesterday, with tens down 2.8 bps to 1.67%. The eurodollar curve flattened with reds up a modest 1.875, but greens, blues and golds were +4, +5.5 and +5.75 even though there continues to be net buying of blue midcurve puts. The only thing that matters is that the Fed continues to monetize the administration’s stimulus plans, and if those plans are slightly trimmed, then it means that the deficit won’t be quite as bad. We’re all under Stephanie Kelton’s spell now. It’s the Birth of the PEOPLE’S Economy.
–The Colonial pipeline hackers were apparently paid $5 million in ransom. Now they can buy a shack in the Bay area and live as communal roommates eating Cheetos while continuing their side gigs as Uber Eats drivers and still have a little money left over for blue hair dye. The governor of Ohio is paying $5 million for people to get vaccine shots. Patrick Mahomes contract extension was over $500 million. Concepts of value and money seem to have taken a twisted turn. Why do tens present a good buying opportunity at a yield of 1.67? Because they are going up, that’s why.
