Jim Grant on the impact of inflation on the 2-year treasury notes from A CNBC interview last week (7/11/2018).
Q2 hedge fund letters, conference, scoops etc
Joining me this morning Jim. You're entirely correct. All right. You know three gauges of inflation we have the underlying inflation gauge you IGY by the New York Fed. That's the highest level since those six BPR year over year quarter day highest in six and a half years three point four per surrogate's personal consumption expenditure hit that magic 2 percent first time in six years of May. GM always that inflation ramping up why are you still in the 80s for 10 year notes.
Well for one thing the U.S. Treasury is perhaps the cleanest dirty shirt. Who else who with sovereign debt in the developed world yields even less. With that said Lucchesi after inflation he'll offer US Treasuries to tell us what you find is nothing there. Over 50 years. Ten years. The real yield so-called real yield of two point three percent say the inflation rate. More we get a CPI every two point nine percent two years it is 2.5 percent what is a 10 year yield right now 2.8. So essentially nothing after inflation. So we may be better than most sovereign yields though he's still very neger with his present power the real conundrum. You know he wants to keep taking with good reason as I just mentioned all the latest indicators get along and isn't cooperating. And what does he do. Well I think he motors ahead. I think perhaps to his cost as an English speaker when he says he can actually understand what he says and what he says is that the models tell him that there is no real risk of a serious recession. That may be correct but the model here got a President Trump.
