Goofy MSM Headline of the Week: Get Ready for a Bond Meltdown

Forbes wants you to Get Ready for a Bond Meltdown.

“The obsession of the Federal Reserve and other central banks with keeping interest rates at extremely low levels has grossly inflated the value of both government and high-grade corporate bonds and sets up fixed-income investors for potential disaster.”

As it has been showing lately, the bond market tells the Fed what to do.  They are being put under pressure to raise the Funds rate because long-term yields have been rising (as we, unlike the mainstream media) anticipated earlier in 2016.  Not only that, the yield curve has been rising, implying that the Fed is behind said curve.  That’s the global market in Treasury bonds’ doing, not the Fed’s doing.

The article goes on to illustrate the very real moral hazards of ultra low interest rates over such a long period and you can read the rest on your own if you’d like.  But for our purposes here, I simply want to illustrate yet another MSM piece that is trying to stir people up and get them emotional at the wrong time.  This Public Optimism Index from Sentimentrader (my mark ups) tells the story perfectly…

30 year bond public optimism

The right time to get alarmed about rising rates?  Well, there was the unsustainable NIRP hysteria promoted far and wide by our friends the MSM (when the public loved the long bond).  Then there was the shot upward in yields, as an over loved bond market reacted in good contrary fashion.  But when rates and yield curves crossed their 200 day moving averages everyone should have been on the rising rates theme.  30yr yields were at 2.5% then.  Now they are above 3%.

tyx daily chart

Imagine, the MSM are trumpeting again (I actually saw a headline the other day talking about the “Great Rotation II” out of bonds and into stocks) as a marker that has limited previous rises in interest rates for decades, approaches.  The ‘limiter’ on the Continuum (our monthly view of the 30 year yield) is at 3.4%.

tyx monthly chart

A subscriber asked at what point would an over throw above 3.4% cross from secular downtrend to new major uptrend.  The answer, technically speaking, is above 4% per the high made on the financial media’s “Great Rotation” hype at the end of 2013.

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