Daily Note – Deflation? Reflation?


QE- Deflation or reflation?

United Kingdom: Deflation for April

United States: Housing Starts rebound strongly

Eurozone: CPI in line with expectations



Good morning,

The dollar, the U.S. bond market and the European stock market have all recently become infected with a highly contagious disease. The source of this nasty fever appears to be coming from none other than the sleepy old German bond market. The ever-levitating Bund began its post-QE crash from 0 to 80bps about 2 weeks ago and it brought down with it nearly all the other popular European QE-driven trades. It was not just the global currency and equity markets which were hit. There was plenty of pain doled out in off-piste runs such as swap spread, yield curve spread and volatility markets.

But, as we have argued for the last few weeks in these commentaries, the long Bund trade was always the weakest expression of the European QE trade (just like the long UST trade was the weakest expression of the US QE trade). When QE begins people get excited about front running central bank purchases. So they buy up everything they believe the central bank might buy.


Download a FULL PDF version of the Daily Note:

Global Macro-Daily Note 20th May 2015


The statements, opinions and analyses presented in the articles, newsletters, and other materials appearing on this website are provided as general information and for educational purposes. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this website is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. David McWilliams shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

Categories: Uncategorized