US headline inflation was a touch low and the market has piled into bonds. The temptation is to read something into the data but I think it’s a symptom of the incredible demand for Treasuries into year end. The CPI figures shouldn’t have changed anyone’s idea about QE3.
Yields are now lower across the entire curve despite higher stocks, commodities and a weaker USD. No one wants to show anything on their balance sheet at year-end except Treasuries. It’s a disheartening sign for anyone expecting a risk rally (me included).
