This index of non-energy industrial commodities (mundane things such as burlap, butter, cocoa beans, copper scrap, corn, cotton, hides, hogs, lard, lead scrap, print cloth, rosin, rubber, soybean oil, steel scrap, steers, sugar, tallow, tin, wheat, wool tops, and zinc) began to weaken last summer as the Eurozone sovereign debt crisis was heating up and fears of another financial crisis caused sparked a wave of risk-aversion and de-risking: swap spreads rose, equities declined, Treasury yields plunged, and credit spreads widened as investors feared a double-dip recession. Yet so far this year, we have seen just the reverse: swap spreads, particularly in the U.S., have declined, equities are up, credit spreads have tightened, and now—as the above chart shows—commodity prices are turning up (as of Friday, the CRB Spot index had exceeded both its 50- and 100-day moving average). Moreover, copper prices have jumped 27% since October, and the JOC metals index is up almost 16% since December. All of this suggests that global growth fundamentals are improving.
As this chart of credit default swap spreads shows, there has been a substantial improvement in spreads since late November '11. Spreads are still relatively high, but there's been important improvement on the margin.
I note again that Treasury yields remain terribly depressed, despite all the stirrings of activity going on. How much longer can the bond market remain terrified of growth?