Rates Are Peaking or Bond Bear Market Underway

When a long-term market trend turns, there are many different ways to see it. Big moves show in all manner of data, from charts to fundamentals. This is one of the charts I watch for a clear break in bonds: the 100-day moving average on the 30-year Treasury.

The 100-month moving average of the 30-year Treasury yield was broken during the 1994 bond rout, the 2000 market peak, the 2007 market peak, in the 2009 post-crisis reaction period, in 2011. It also came close in 2014. ALL of those moves were reversed within the month.

The 2009 move was a "QE is Weimar" outlier move that came in the wake of a huge market panic. The only other 100-month MA break that didn't lead to a market decline was 1994.

Two points worth keeping in mind:

1. The yield curve is steepening, but not because short-term rates are tumbling. We are in somewhat uncharted territory (have to check history before 1980) because of QE and QT.

2. Europe and China can't follow U.S. rates higher under current economic conditions. The dollar will rise.

No comments:

Post a Comment