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| US Bonds Review |
US Treasury bond’s overall trend, revealed by trends of price, leverage, and time, are defined in The Matrix for subscribers.
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Inflation Is Persistent
Costs for goods and services rose more than expected in October, providing fresh warning signs for the Federal Reserve in its fight to lower inflation.
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The October CPI report, an understated and manipulated inflation measure, showed that inflation remains stubbornly high despite a slowing economy (see TAC Model). This is discussed further in the Economy & Stock Report. The headline number show prices rising 0.4%, and core inflation increasing 0.3%, both above expectations. Although inflation slowed from September, underlying price pressures continue to spread throughout the economy. The absence of reliable year-over-year data due to the 2025 government shutdown makes the monthly figures particularly important.
TAC Model: Economy & Inflation
The inflation problem is not limited to consumer demand. Energy disruptions caused by the war with Iran, Ukraine and Russia, rising transportation and insurance costs, tariffs, and massive debt fueled deficits, and tariffs are also contributing to inflationary pressure. Investments in artificial intelligence infrastructure are increasing demand for electricity, construction materials, equipment, and skilled labor.
Wall Street is now calling for additional rate hikes by Federal Reserve. The computer tells us the Fed is too loose. It also shows the odds of rate hike are rising. We'll discuss this further in a US Bond Report update. Higher rates cannot resolve the structural problems driving inflation. Interest rate hikes, while widely accepted as an appropriate policy change, risk making mortgages, business financing, and federal debt increasingly expensive. The housing market, which few want to talk about, continues to struggle and underperform with high borrowing costs, elevated home prices, and limited transactions.
The majority assumes monetary policy will resolve problems created by fiscal decisions, wars, and other supply-side constraints. Higher interest rates may weaken employment, investment, and economic activity without eliminating the underlying structural drivers of inflation. Ultimately, the bond market will determine how much confidence investors have in the government's ability to manage its debt and finance its obligations. The October report reinforces a troubling reality that inflation is not simply an interest-rate problem. It's assumed that the Federal Reserve can fix problems created by policies beyond its control. False assumptions typically are broken harshly by the invisible hand through unexpected price action. Stay tuned.
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