In his immortal “Ballad Of A Thin Man” composed way back in 1965, Bob Dylan might well have been channeling the future Chairman of the Fed. After all, substitute the Fed’s massive tech era DSGE model (dynamic stochastic general equilibrium) for the “pencil” of earlier times and you pretty much have Jay Powell’s number:
You walk into the room with your pencil in your hand
You see somebody naked and you say, “Who is that man?”
You try so hard but you don’t understand
Just what you will say when you get home
Because something is happening here but you don’t know what it is
Do you, Mr. Jones?
The “something” happening at the moment is the collapse of bond yields everywhere into the financial netherworld of negative rates. As of this weekend there is now $13.4 trillion of such sub-zero bonds outstanding, which amount to fully 25% of all the investment grade bonds extant on the planet.