[T]he one thing that explains the generally positive tone in Treasuries ithis growing awareness of deflation. It is so apparent looking at how the retailers were behaving in the lead up to the holiday season — they have essentially been providing Black Friday-style discounting weeks in advance...
Indeed, as we have seen in the recent trade data out of Asia and the sub-50 flash estimate for China’s PMI, the global economy is now on the down escalator. Maersk Line, the world’s largest container shipper by volume, just announced plans to cut capacity among its Asia-Europe routes (see Europe Crisis Hits Shippers on page B3 of the weekend WSJ). Market measures of receding industrial activity can also be found in the price of aluminum, which just hit its lowest level in 17 months (off nearly 6% last week and by nearly 25% since this last leg of the global debt crisis broke last July) and leading a more general downturn in the base and industrial metals complex.
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