Thread by @hktg13

Fascinating to see the shape of US (sell 2y & buy 10 y) trade indicator - a gauge that aims to arrive at collective market view of long term inflation/economic recovery in US, while reducing near term noise/base effects etc

https://twitter.com/hktg13/status/1414943961953701888

Are bond mkts signalling tht recovery ahead will be even more anaemic than previous decade (this cycle so far topping at 150bps as against 300 bps usually)? More imp,in the last few sessions, US2/10 has fallen below 100bps.Are we in for a muddle-through economy in decade ahead?

Or is it too premature to make that inference from bond market yet?

As we embarked on post covid recovery, thr were 2 new variables that many blv will lead to stronger growth ahead.
1. Fiscal stimulus has come thru this time n so stronger n sustainable recovery
2. Global credit growth will be high as HH, corp hv good B/S & will thus re-leverage

For now, IMO, bond mkts seem to suggest that #1 is behind us and unlikely to recur. Maybe #2 is still a variable at play, since one doesn't know how Pvt sector n consumers will react in fully normalised world?

Of course, markets can be wrong, and will reprice quickly if they visualise the prospects of enduring recovery prospects that can last much longer & stronger than before? Only time will tell...