Watch this Video: Manduca on euro, dollar & debt

8 minute rundown of everything that will be important in the coming days and weeks.

4% is the important level on the 10-year. Notice the run-up over the past two days. This is the opposite of what happened through much of the stock market rally. When stocks went DOWN, bond yields went DOWN, and the U.S. dollar went UP. Over the past two days, the U.S. dollar went UP, bond yields went UP, and stocks went DOWN. I don't believe this will continue (There was a similar spike at the beginning of December 2009), but this is the ultimate deflation scenario. Credit dries up, which forces real yields high. Interest rates jump, but there's no inflation. Prices of financial assets collapse and CPI turns negative. Yields will initially climb, but as soon as "the market", that is individual investors, realize what is happening, they will race into bonds and yields will tumble. Yields will still be high in real terms, however, since holding anything but the safest assets (cash, short-term Treasuries) will result in losses. It's the washout scenario, the collapse that the Fed prevented (delayed?) in 2009.

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