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Deflation risk? As Treasurys plummet (TLT -2.4%), inflation-protected bonds (TIP +0.5%) move in...

Deflation risk? As Treasurys plummet (TLT -2.4%), inflation-protected bonds (TIP +0.5%) move in the opposite direction. Michael Gayed tracks the ratio of TIP to the 7-10 year Treasury ETF (IEF) as a way to gauge inflation expectations, and it's spiked higher of late, suggesting far higher inflation fears.
Comments (12)
  • Swass
    , contributor
    Comments (419) | Send Message
     
    Of course there is a deflation risk. DEflation is what the Fed has been fighting and the battle they are losing is all about. Sure, their balance sheet is growing, but the velocity of money isn't something they have much control over. After all, they can't force people to borrow money to grow businesses or buy homes.
    14 Sep 2012, 03:57 PM Reply Like
  • Abraxas
    , contributor
    Comments (293) | Send Message
     
    There was a deflation risk but such a risk has practically now almost disappeared. The FED stimulus will push inflation higher and cause Treasury yields to rise (they have risen the last two times around almost immediately after the FED’s easing).
    14 Sep 2012, 04:31 PM Reply Like
  • Swass
    , contributor
    Comments (419) | Send Message
     
    I don't think that risk has at all gone away. Everyone keeps talking inflation, but take a look at your yield curve between low and high risk debt. Inflation would point to long and short, high and low risk yields rising. Treasuries have been in a long-term bull market with stocks and are now turning down, as stocks will do. Some of these yields will rise, not because of inflation risk, but because of default risk. I strongly argue that the US government will default on at least some of their obligations, which is strongly deflationary. The issue the market has is it has too much debt. The ONLY way this can be fixed is by letting the market correct, which means massive defaults.

     

    The Fed is buying Mortgages. They are trying to free up capital to lend by putting it on their balance sheets, but just because banks might be willing to lend then doesn't mean there are any takers.
    14 Sep 2012, 05:47 PM Reply Like
  • Abraxas
    , contributor
    Comments (293) | Send Message
     
    http://bit.ly/RSk1Ra
    14 Sep 2012, 06:11 PM Reply Like
  • pollyserial
    , contributor
    Comments (1055) | Send Message
     
    Inflation? Bernanke says he has it under control. Uh-huh.
    14 Sep 2012, 04:26 PM Reply Like
  • Spooly
    , contributor
    Comments (12) | Send Message
     
    $4 gas.... corn, wheat and soybeans doing a moon shot. yes.. no inflation.
    15 Sep 2012, 12:26 AM Reply Like
  • tom_t
    , contributor
    Comments (260) | Send Message
     
    Yes, but the government ignores those items, along with gas. As long as the price of an iPhone remains steady, then there's no inflation! :)
    15 Sep 2012, 07:34 AM Reply Like
  • The Geoffster
    , contributor
    Comments (4010) | Send Message
     
    I almost can't wait for the day when the Fed begins to unwind. Does anyone seriously believe the Fed's assets will be marketable at par without massive inflation?
    14 Sep 2012, 05:06 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    The Fed prints money. It can't go broke. So your concern without merit. Never treat the Fed's balance sheet as comparable to a household or corporation. It is not.
    14 Sep 2012, 05:52 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4010) | Send Message
     
    Are you saying the Fed is not trying to inflate?
    14 Sep 2012, 05:59 PM Reply Like
  • Abraxas
    , contributor
    Comments (293) | Send Message
     
    Take look at this:

     

    http://bit.ly/RSk1Ra
    14 Sep 2012, 06:12 PM Reply Like
  • davidroossien
    , contributor
    Comments (36) | Send Message
     
    There is deflation in terms of gold and inflation in terms of dollars.
    15 Sep 2012, 10:41 PM Reply Like
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