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You continue on story of corn prices yeah that was interesting -- the -- could be affecting more than just -- Food and fuel prices -- joining me now is Marc Chandler head of global currency strategy at brown Brothers Harriman.
I tell you used not just in need in our tracks with this report even Lou Dobbs was on his way out of the studio and he said.
Corn prices relating to it that the yield on the ten -- what is the relationship there so -- what about about that because normally they have a positive relationship.
And you say it's turned negative and that tells you something.
But yes sure -- in the in the near term the relationship between corn and US interest rates have gone -- -- that is a higher corn prices have gone.
Do you -- -- bond yields have gone not -- it's the only factor affecting bond prices -- bond yields.
But the higher corn prices essentially means not more inflation if they say -- knee jerk reaction is more inflation but what really happened and it squeezes.
The disposal income from the families and consumers.
Are gonna be are going to be squeeze and it is going to a weakening economy and therefore helping up -- yields lower.
Do you think maybe it's just a coincidence that we're seeing that relationship right now I mean you think it's -- Or maybe they're both impacted by the value.
Not a there's about a dollar I think -- specifically it's right here right now I think that the relationship is partly -- of course.
On every side there -- other factors depressing US bond yields weak US economy.
You what's going on in Europe the safe haven flows but in addition to that he drought condition in the US the further squeeze the US consumer and that's -- weighs down on interest rates as well.
Yes so I mean let's take this out into the future.
You know obviously we think corn prices are going even higher given what's going on with the drought right now.
So do you think that the yields on the -- is going even lower.
Yes I think got a number of factors but including the -- with keep pushing US yields lower I think the next big stopping point of people are watching in the ten year yield is one and a quarter percent.
And then you also say that -- a year or two after you see this phenomenon that recession follows on and that's what -- your biggest point.
I don't know I really go that -- I think essentially have to follow I think partly reflects what the pot -- pressure on policy makers to respond before recession.
I see the idea GDP revisions last week -- even -- FQ two GDP I don't see any sign of recession in the next several quarters.
Okay see you don't -- happen this time it it does sometimes increase the likelihood of those relationship barrier.
Abandoning that part of that is -- heart out and -- about -- a privately said that but I think that in general I think that the economy is driven we talked about a fifteen trillion dollar economy from most Americans don't spend much more than seven or 8% of their.
On the disposal income on food I don't think this is going to be -- -- push us into recession I do think we're -- -- slow patch -- -- slow patch of the economy -- very interesting stuff Marc Chandler thanks.
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