Gary Shilling: 10- and 30-Year Treasury Yields Are Heading Lower, Deflationary Forces Are Still in the Economy ($TNX, $TYX, CPI)

Gary Shilling, president of A. Gary Shilling & Co., told Daily Ticker on 11/12/2013 that he thinks Treasury yields are heading lower because deflationary forces are still in the economy. He believes that the deflationary effect on yields will, in the end, overpower the Fed's taper. Tapering just means they'll be buying less bonds from the banks (injecting less money into the banking system). Going forward, Gary Shilling sees the 10-year yield below 2% and the 30-year yield below 3% (30 year charts below). He thinks the U.S. has 4-5 years left in its deleveraging cycle, which is the reason why economic growth has been so weak and why we're in a perma-temp(2)/part time jobs market.

"That GDP, most of that was inventories. And when you build up inventories, that usually isn't a good sign. It means you're stuck with things you can't sell. As far as the employment picture, most of those jobs are low income people."

"We're limping along at about 2% real GDP; we've got 1.5 million people fewer employed than at the peak; and the pool of people that could be employed has increased by about 15 million."



You can see that inflation is not of concern at the moment, in CPI terms at least. Here are charts of the consumer price index via BLS.gov.

Monthly CPI Year-Over-Year % (Not Seasonally Adjusted) - BLS.gov
Monthly CPI Year-Over-Year % (Seasonally Adjusted)
Half Year CPI Year-Over-Year % (Not Seasonally Adjusted)
Treasury bond yields courtesy of TradingView.com.


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