Disinversion

Executive Summary: Is the federal budget deficit getting too big for the bond market to fund without yields moving higher? That seems to be a growing concern in both the bond and stock markets. In the past, bond yields were determined mostly by the Fed’s response to inflation, which is moderating; supply and demand didn’t matter much, but they may now. Today, we examine why this period of deficit widening is different than past ones. … We also examine two scenarios that could unwind the inversion of the yield curve—one bullish, one bearish—and recap data supporting both. … And: Dr. Ed reviews “The Man Who Saved the Game” (+ + +).