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Inflation Just Hit A 69-Month High - peak11

To help contextualize this morning's market moves around the world, below are insights and analysis from our research and Hedgeye CEO Keith McCullough's Twitter feed.

A 69-Month High In Inflation

"The headline Producer Price Index accelerates for a 3rd consecutive month and highest since February 2012 at +2.8% year-over-year," writes CEO Keith McCullough. That's a 69-month high. 

Inflation Accelerating = Bond Yields Up

Look at the chart below. It's no surprised that 2-year Treasury yields are up 48 basis points year-to-date with much of that ramp in September. With consumer prices accelerating over the past three months, investors have demanded a higher return in excess of inflation.

an important read: "Why the U.S. Yield Curve is Flattening"

The yield spread (10-year Treasury yield minus 2-year Treasury yield) is currently at a lowly +69bps. It's common for U.S. growth bears to say a flattening yield curve is indicative of a slowing U.S. economy, since bonds catch a bid in the flight to safety during a slowdown. But bears are missing two important points about bond yields: Inflation and global central bank policy divergences.

Inflation Just Hit A 69-Month High - Email graphic   Cyber Monday 2