There is a contradiction today. The market is up nicely, but the 10yr is up nicely too. To me, that makes no sense at this economic juncture.
The push into treasuries suggests a weak economy, but the rise in everything else suggests a stronger economy. Which is it?
Real economic growth sparks higher rates. That is a constant, unless there is a deflationary aspect that can cap the rates. However, at the moment, I do not see a deflationary aspect of the economy. Housing has stabilized, commodities are up and so are credit pricing. The only deflationary aspect to this economy is the lack of credit expansion, but I would not assume it to be a real deflationary threat given the commodity prices are up so much. (It is putting a pause on our economy growth, but not causing deflation.)
I am uncomfortable with this contradiction. It does not make sense to me. I will evaluate potential reasons, in order to re-adjust my thesis, but the reasons have to be pretty solid. (Right now I think the 10yr is still being bought by the Fed, which could be causing the imbalance.)
Looking at the recent rise in the Baltic Dry Index, I want to say the bond market is off. More on this later, w/charts. Assuming conditions remain.