A Big Red Flag In The Credit Market

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by: Hedgeye
Summary

Treasury bond volatility is picking up. That’s a big red flag for the credit market.

Our Macro team's forecast is for the U.S. economy to slow, which will have negative implications for financial markets.

Disconcerting trends in the bond market suggest the Federal Reserve is behind the curve from a policy standpoint on underlying economic reality.

Treasury bond volatility is picking up. That's a big red flag for the credit market - and yet another sign that the U.S. economic cycle is slowing.

Hedgeye CEO Keith McCullough and Macro analyst Darius Dale explain in the clip above how a rise in bond market volatility - known as the MOVE Index - is a warning sign for investors.

"It happens 100% of the time when the cycle is obviously slowing," McCullough explains.

"If you measure and map the economic data daily like we do, you would have to be willfully blind to not know that the economy is slowing and that profits are going negative year-over-year."

"Once the MOVE starts moving it means the market is effectively pricing in interest rate cuts by the Federal Reserve," Dale adds. "The faster the MOVE moves out, the more the market doesn't believe the Fed's communication."

Watch the full video above for more.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.