Risk On, Risk Off

Today was a good day for the diehard hard-landers and the "stag-disinflationists." They're probably high fiving each other. We are in neither camp–we expect a continuation of “immaculate disinflation,” i.e., a growing economy with subdued inflation. We're high fiving over today’s productivity and labor costs report.

In any event, bond investors are certainly enjoying themselves; the 10-year yield fell 12 basis points to 3.98% and is now down more than 60bps in the past 3 months. The 10-year TIPS yield slid below 1.8% to its lowest since February (chart).