Bond Outlook June 11th

Last week we wrote that it was difficult to call the moment when a bubble begins to deflate, then promptly demonstrated just how difficult this call was by suggesting that the turning moment for the commodities bubble had arrived. Wrong! Oil turned right around and began climbing again. We are duly humbled and will be more hesitant about sticking our necks out again! Yet the principle remains that the current commodities bubble, even including oil, will eventually deflate.

Where we were quite right last week was on the assertion that Bernanke has finally admitted that a weak USD feeds inflation, implying an end to rate cuts and a decent pause in the dollar’s decline.