The Real World - New York

Mtv was one of the early pioneers in reality TV with a show called the Real World. At the time, it was kinda fascinating because you felt like a fly on the wall watching these people's lives happen. Now it's all staged. Actually, probably was then too but maybe because it was new, it didn't seem like it.

Anyway, REAL interest rates are all the talk on the Terminal and hitting new records. It is kind of bizarre to see bonds actually offer attractive yields. And from a risk-return standpoint, how can you go wrong with a short duration Treasury here? You get a great yield and while the US has shakier finances than it once did, it's still a Treasury, the cleanest dirty shirt in the laundry.

This challenge is when we see spikes in the real yield (the 2 yr illustrated here), you often get a selloff in the broad market. But it hasn't happened this time just yet. And maybe it won't. Correlation is not perfectly negative, although it looks pretty negative...

But it's definitely more positive over the last couple of months. Chatter has been that the bond market is finally conceding to "higher for longer", "a resilient economy", "BOJ letting go of YCC", etc. Again, like most things, it's probably due to a combination of things. Data that is not new, it's just people are waking up to it.

I won't go so far as to say the 40 year bond bull has ended and set to reverse. But I do think we are range bound as inflation will likely be stickier than expected.