The three major drivers of Wall Street Bankers getting paid in 2009 are as follows:
1. The Buck Burning
2. The Yield Curve
3. The Associated Resurgence in M&A
At this stage of the game, most people understand that a Burning Buck equates to REFLATION in everything priced in US Dollars. From US Denominated Debt to the Financial Services companies that slog around with those liabilities, Dollar down got the Bankers and Debtors paid.
The Yield Curve, however, doesn’t get as much airtime. Give it some time. It will…
Andrew Barber and I have shown the peak of the yield spread (10-year US Treasury yields minus 2-year yields, in basis points), which, not surprisingly came at +276 basis points wide in May of Q209. Since that peak, the yield spread has made a series of lower-highs. This morning’s yield spread is hitting a 6-month low at +234 basis points wide.
On the margin, lower-highs have an implied question. For the bankers who are able to borrow short and lend long, is the rear-view in the Yield Curve as good as it gets?
Keith R. McCullough
Chief Executive Officer