No active mechanism this week — the standing read above carries the bloc.
What would change the read
Inflation surprise (upside)Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation)Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut)The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.
China
No active mechanism this week — the standing read above carries the bloc.
What would change the read
Monetary easing (rate cut)The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.
Monetary tightening (rate hike)The policy rate is steady, so the tightening channel is dormant. A hike would fire it — watch it because it hits long-duration growth, long bonds, and gold first.
Growth acceleration (expansionary PMI)Manufacturing isn't both expanding and accelerating, so the growth-acceleration channel is dormant. A rising PMI back above 50 would fire it — it matters because it's the signal to rotate from defensives toward cyclicals.
Euro area
⚠ Stale inputs (latest print is old): 10Y yield. The standing read uses the most recent available release — treat as provisional.
No active mechanism this week — the standing read above carries the bloc.
What would change the read
Monetary easing (rate cut)The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.
Monetary tightening (rate hike)The policy rate is steady, so the tightening channel is dormant. A hike would fire it — watch it because it hits long-duration growth, long bonds, and gold first.
Growth acceleration (expansionary PMI)Manufacturing isn't both expanding and accelerating, so the growth-acceleration channel is dormant. A rising PMI back above 50 would fire it — it matters because it's the signal to rotate from defensives toward cyclicals.
Japan
⚠ Stale inputs (latest print is old): 10Y yield. The standing read uses the most recent available release — treat as provisional.
No active mechanism this week — the standing read above carries the bloc.
What would change the read
Inflation surprise (upside)Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation)Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut)The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.
The dataL3
United States
Indicator
Current
Prior
Δ
As of
CPI (YoY)
1.20
1.32
-0.12 ▼
2020-12-10
Core CPI
0.20
0.13
+0.07 ▬
2020-12-10
Core PCE
1.51
1.40
+0.11 ▲
2020-12-01
Policy rate
0.25
0.25
+0.00 ▬
2020-12-13
GDP
33.10
33.10
+0.00 ▬
2020-11-25
PMI (mfg)
57.50
59.30
-1.80 ▼
2020-12-01
PMI (svc)
55.90
56.60
-0.70 ▼
2020-12-03
Unemployment
6.70
6.70
+0.00 ▬
2020-12-04
10Y yield
0.90
0.92
-0.02 ▬
2020-12-11
2Y yield
0.11
0.14
-0.03 ▬
2020-12-11
2s10s slope
0.79
0.78
+0.01 ▬
2020-12-11
FX vs USD
90.98
90.79
+0.19 ▬
2020-12-11
China
Indicator
Current
Prior
Δ
As of
CPI (YoY)
-0.50
0.50
-1.00 ▼
2020-12-09
Policy rate
3.85
3.85
+0.00 ▬
2020-11-20
GDP
4.90
3.20
+1.70 ▲
2020-10-19
PMI (mfg)
51.90
52.10
-0.20 ▬
2020-12-01
PMI (svc)
56.40
56.20
+0.20 ▬
2020-11-30
Unemployment
5.20
5.20
+0.00 ▬
2020-12-01
10Y yield
3.30
3.26
+0.04 ▬
2020-12-11
2Y yield
2.98
2.94
+0.04 ▬
2020-12-11
2s10s slope
0.31
0.32
-0.00 ▬
2020-12-11
FX vs USD
6.54
6.54
+0.00 ▬
2020-12-11
Euro area
Indicator
Current
Prior
Δ
As of
CPI (YoY)
-0.30
-0.30
+0.00 ▬
2020-12-01
Policy rate
0.00
0.00
+0.00 ▬
2020-12-10
GDP
-0.30
0.20
-0.50 ▼
2020-12-01
PMI (mfg)
53.80
53.60
+0.20 ▬
2020-12-01
PMI (svc)
41.70
41.30
+0.40 ▲
2020-12-03
Unemployment
8.40
8.30
+0.10 ▬
2020-12-02
10Y yield
-0.09
-0.06
-0.04 ▬
2020-12-01 ⚠
FX vs USD
1.21
1.21
+0.01 ▬
2020-12-11
Japan
Indicator
Current
Prior
Δ
As of
CPI (YoY)
-0.40
0.00
-0.40 ▼
2020-11-20
Core CPI
-0.40
-0.30
-0.10 ▼
2020-11-20
Policy rate
-0.10
-0.10
+0.00 ▬
2020-10-29
GDP
n/a
PMI (mfg)
n/a
Unemployment
3.10
3.00
+0.10 ▲
2020-12-01
10Y yield
0.02
0.03
-0.01 ▬
2020-12-01 ⚠
FX vs USD
104.18
104.27
-0.09 ▬
2020-12-11
Concept libraryL3
Terms marked ✓ are linked inline above — click any dotted term in the text to expand it in place.
2s10s
The gap between the 10-year and 2-year government bond yields. Positive = normal upward-sloping curve; negative ('inverted') = a classic late-cycle/recession warning.
PMI
Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity.
carry trade
Borrowing in a low-rate currency (long the yen's case) to buy higher-yielding assets elsewhere. It unwinds violently when the funding rate rises or the funding currency strengthens.
credit impulse
The change in the flow of new credit into an economy. A rising impulse front-runs stronger demand for commodities and cyclical goods, with a lag.
cyclicals
Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary.
defensives
Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows.
discount rate
The rate used to convert a future cash flow into today's value. A higher discount rate makes far-off cash flows worth less now.
disinflation
Inflation that is still positive but falling (prices rising more slowly) — distinct from deflation, where prices actually fall.
duration
How sensitive an asset's price is to interest rates. 'Long-duration' assets (long bonds, fast-growing stocks whose profits are years away) move most when rates change.
net interest margin
The spread a bank earns between what it charges on loans and pays on deposits. Higher short rates / steeper curves tend to widen it.
nominal yield
The headline interest rate on a bond, before subtracting inflation.
policy rate
The interest rate a central bank sets directly (e.g. the Fed funds rate, the ECB deposit rate, China's LPR). It anchors all other rates.
rate path
The market's expectation of where the policy rate goes over the next year or two — not just today's level, but the whole expected trajectory.
real yield
The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation.
term premium
The extra yield investors demand to hold a long bond instead of rolling short ones — compensation for tying money up and for issuance/inflation risk.