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Inflation and Treasury auctions

Tomorrow the preferred measure of inflation by the Fed, the PCE, will be published. As you can see in the chart below, not only in the U.S. but in major Developed economies, it’s heading down. And despite the fact that are almost identical everywhere, there are two different readings by Central Banks: the ECB is more inclined to cut rates, and may do so now in June, while the Fed is indicating they want to wait further until it reaches the infamous 2% target. At the same time, the US treasury is executing its plan to issue debt to finance the U.S. deficit, renew the existing maturing bonds and extend durations and push investors from T-Bills to Notes and Bonds at a time where the appetite for treasuries is diminished. Lackluster demand at the auctions is pushing yields up, and may be affecting the Nasdaq in its attempt to maintain the 17k level.

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