Thursday, September 23, 2010

And now back to our regularly scheduled meltdown ...



Today's chart is brought to you by the letter B, as in fucking broke.  The idea is that bond yields more or less track economic activity, in this case the comparison is between ten year bunds and a survey of German industrial production expectations.  I have annotated the picture to better reflect current reality -- it appears that the PIGS fit nicely into this gap (yes, I know, it's fiesta time in Spain for the moment, don't ask me how, so I guess the plural is out for now).  All the demand for those bonds has sensibly run towards the ever disciplined bosom of mama Merkel.

UPDATE:  The same report also shows where you can stick China.  One of these days they are just going to have to get their own damn financial system instead of leeching of off ours.  Attentive readers will note that either of these graphs could be interpreted as bearish for bonds (dramatic yield increase in the offing, which of course was the point of the report), or bearish for the economy (maybe the bond market is smarter than the people surveyed).  I'm going to stick with my explanation however.  This correlation is falling apart because of fundamental imbalances in our global financial system.













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