Trump Tweet, Catches Gold Bid

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Updated, April 11, 2017 at 9pm

Safe haven assets advanced after the White House press secretary issued a warning to Syria and as tensions over North Korea surged to the highest level in over a year.

Ten Year Bond Bull Market

Lower Yields, Soaring Bond PricesUS 10s Gap

Yes, Wall St. was all beared up on bonds for 2017.  If we close at this level on 10s (U.S. 10 Year Treasury), it would be the best mark since November 15.   For the fourth year in a row, the Street’s consensus has been dead wrong on bond prices.

*Gold Miners GDX is up 3.1% today and 15.7% since March 9th.

All the Asia Risk Off Indicators are Surging:

S Korea CDS
Cost of borrow on S Korea Equities
VIX, highest level since November 10th
VIX Futures Curve flattening, most since November 7th


S Korea Thai

The Euro was lower against the Japanese Yen for 11 consecutive session, that’s the longest losing streak on record.  The Yen is seen as a safe haven refuge in a rising Asia risk off environment.  The Yen’s surge is viewed confirmation of the N. Korea high drama.  In recent weeks we’ve witnessed a sharp divergence, the cost of default protection on S. Korea has surged relative to their neighbors in Asia.  South Korea is a substantially stronger credit  than Thailand, nearly five levels higher per Moody’s.  On the other hand, the cost of insuring the South Korea’s bonds against default is now more expensive than Thailand’s, a powerful divergence indeed.

Treasuries, Reflation Trade Hype Faces the Deflation Risk

Treasuries 2 vs 10s

Wall St lectured their clients on the “reflation trade” in December, they were unanimously calling for a STEEPER yield curve.  If you look above, the curve is FLATTENING, not steepening.   As investors grow more concerned about the growth initiatives coming out of Washington, they’ve been loading up on bonds.  Key technical levels are being violated as the reflation trade loyalists panic out of their positions.

U.S. bond yields fell following Federal Reserve Chair Yellen’s confirmation the central bank has shifted gears from post-crisis healing to sustaining economic gains. Oil wobbled after five days of gains as EIA data due Wednesday was expected to show U.S. stockpiles retreated from a record, Bloomberg reported.

“I explained to the President of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem!
North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A.”

President Donald Trump, April 11, 2017

Gold Break New

Gold and Treasuries strengthened with the Japanese yen on lingering investor concern about global security risks and the path of U.S. interest rates. Crude struggled to extend this years.

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South Korea 5 Year CDS

S Korea 5 YearThe cost of default protection on South Korea rose to the highest level since July on the surge in geopolitical nerves.  S. Korea’s stock loans for short-selling hit record high amid the tensions. 



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