Click to enlarge.
We fell off the chart again. Since I had to change the chart to accommodate the seemingly relentless path of monetary policy, I also decided to add a new data series in purple.
1. Blue represents pre-deflationary crisis.
2. Red represents deflationary crisis.
3. Purple represents post-deflationary crisis.
As seen in the purple trend line, there is actually more certainty now than before the housing bubble popped. We're sticking to that purple trend line like glue. The turning point appears to be December 15, 2010. That starting date yields the highest correlation (0.95). Also note that the blue and purple trend lines are well-aligned.
Click to enlarge.
The daily movements in interest rates are also modest. From a volatility standpoint, there's just not much to see here.
Those waiting for higher interest rates once this period of supposed uncertainty comes to an end may be severely disappointed. Where is the panic in these charts? Where is the fear? Instead, I think we're seeing a growing realization that the era of making money off of money has come to an end. To back my long-standing theory, it is "certainly" difficult to make money off of the current -0.59% 10-year TIPS.
See Also:
Uncharted Territory
Source Data:
FRB: Selected Interest Rates
US Treasury: Interest Rates
Clearly, big money believes it is better to lock in a small loss over 10 years than risk bigger losses thru inflation.
ReplyDeleteIt may be hard to make money on money, but it is still easy to lose money on money. And will probably get easier.
Mr Slippery,
ReplyDeleteProsperity
It may be hard to make money on money, but it is still easy to lose money on money. And will probably get easier.
That sounds like a great demotivational poster from despair.com.
Persistence
It's over, man. Let her go.
Prosperity? Persistence? It's all good.