With 30 year bond yields set to close their lowest in 10 months, CNBC’s Rick Santelli is concerned at the signals that the Treasury yield curve is sending. If yesterday’s minutes from the Fed were supposed to walk back their ‘hawkish’ tone, then Santelli slams they are “gonna need a really big billboard” because the term structure is still flattening. “When ‘flattening’ is the theme, that is not painting a rosy outlook for the long-term economy,” and as Santelli warns, this is when the Fed is pulling out of its extraordinary policies. Santelli screams, “the entire monetary policy side has to be under review…” and the only way you can keep the fallacy alive is “if you sell it as a ‘deflationary’ issue, where you can keep trying the same thing that isn’t working.”
As Santelli explains in this brief clip,
“if anything [exogenous] were to happen to our markets or economy, where do they go next? How do they ease? Policy should have been normalized already and we’re paying a price for it.”
Simply put, the central banks now need to instil a fear of deflation to enable their ZIRP for longer forward guidance.
“Don’t ignore the long-end, and don’t buy into deflation… it’s telling you recessionary pressures are building”
Â
