Michael Every at Rabobank would make a great blogger. He’s often dramatic but he does have good grasp of underlying macro trends as well. Today he tackles as issue I have been discussing at length for some weeks: the convergence of Chinese and US trends:
Don’t look now but even the Chinese currency is slowly starting to move. It’s broken through its 100-day moving average at 6.5282 after sliding all of 0.6% last week (The horror! The horror!) And that’s despite a 60.6% y/y increase in exports. To repeat, the Fed are on blackout.
Think US yields can’t move higher than this, moving other things with them? As Bloomberg notes today, pure economic forecasts (Remember them? They were a simpler time…) suggest that nominal US GDP growth will–briefly–hit a high of 7.6% ahead due to all the sugary Biden stimulus. On the back of *that*, the gap between US nominal GDP and the US 10-year will beat the widest since 1966. The risks must be near term that yields rise to meet nominal growth, even if the longer term (and perhaps not even that long) it is growth that will come down and again, taking yields with it. What do the Fed have to say? That’s right, nothing. They are on blackout.
