Stock Markets partied higher yesterday, utterly unbothered by the optics of the Iran Deal. Bond markets look at the long-term risks – wondering what the consequences of the Iran war might trigger in the coming years when today’s new bonds are set to repay. Traders will be trying to figure out what a new world will look like, and just how sustainable US Bonds markets might be as the global economy shifts.

Western economies succeed because bond and stock markets work together. Bond markets enable governments to finance the optimal conditions for invention and innovation, enabling growth and prosperity. Sometimes Markets fall out of line, while Politics are ruled by votes rather than experience – and that’s where the wobbles start to multiply.

In Bonds there is truth. While government bond yields have risen some 40-50 basis points since the Iran War, and yield curves have steepened, we are not in crisis territory yet. However, the risks of “higher for longer” rates, and sustained inflation have risen. These will impact credit markets and potentially trigger a cascading corporate crisis – leading to all kinds of hell that governments and central banks are now ill-equipped to deal with.

Does the steepness of the US yield curve tell us the US Economy is about to boom, or inflation is about to sink the Treasury markets? To figure out which, you need to interrogate the witnesses and look at what the evidence is telling us.

Y’day we had yet another Judder Moment for markets as the Fed surrendered to Trump and prepares to juice the markets with renewed QE. Have we learnt nothing? No, I guess we have not. Pretend and keep pretending as we enter the Potemkin Economy era. This will not end well.

The UK survived yesterday’s Pretend and Extend budget. It was a lacklustre soap-opera moment. It won’t cure the UK’s long-term issues or fix Broken Britain. If politicians were serious about repairing the political economy of the UK – it’s time for root and branch surgery on the “frictions” that leave the nation suffering Economic Dementia!

Yesterday saw bad political theatre in the UK. Rachel Reeves got up and warned everyone it’s going to be bad and therefore made it so. Acres of negative coverage and lots for the opposition to make noise about. But the reality is maybe very different. There is not that much [more than usual] to worry about.

The amount of nonsense being written about the imminent collapse of the UK Gilts Market defies logic and experience. The numbers show demand for Gilts remains solid – but the growing, and often invented negativity over rising Lond-End yields threatens confidence in the UK’s bond market. Yield curves are steepening around the globe!  

Chancellor Rachel Reeves should be angry, not tearful. The multiple crises facing the UK’s funding have been long-term in creation. Reeves has the opportunity to fix them. The recipe is simple; common sense, political discipline, a dash for growth and a spicing of Gilts Liability Management. C’mon Rachel… you can do it.

What an interesting time we live in. Uncertainty, instability, markets hitting new highs as fears plumb new depths. Nothing to worry about. The global economy and markers are changing. Just how we won’t know till we can see it in the rear-view mirror.