This snippet from NFTRH 467 is an extension of the Bonds & Related Indicators segment that delivered some messages to me that I feel I have got to take seriously in a sort of ‘steady as she goes’ way. No over reactions. And now NFTRH subscribers have the information as well. It could be massively profound and then again, it could be nothing to get worked up over. It has to do with inter-yield dynamics, the stock market and the decades long assumptions of declining yields that the current era has been based upon.
The 30 Year Yield Continuum ©
We’ve not looked at this simple chart of the 30yr yield in a while, so let’s reflect on it for a moment. The post-Volcker era has been populated by Fed heads that in my view have fed off of a secular decline in yields, never failing to promote inflation at the first sign of trouble, under cover the weak yields and thus, tame inflation expectations.
Every damn time the yield has spiked to the monthly EMA 100 (AKA “the limiter”) a deflationary pull has sucked it back down again, sometimes to near disaster like Armageddon ’08 and other times to blissful Goldilocks phases, like the post-2012 period.
I put this chart up to show how profound a change in the big picture of long-term rate dynamics would be. The silliness of the Dec. 2016 Bloomberg headline R.I.P. Bond Bull Market as Charts Say Last Gasps Have Been Taken is on display here. Yields have gone down (bonds up) since that very headline. But if the limiter is one day broken, everything is going to change. That is why we should pay attention to the Sentiment and CoT data in the segment directly above, not only for guidance on the yield curve, but also for guidance on the ‘long bond’ and by extension, future investment strategies.
Here’s the usual screenshot of NFTRH’s page 1. Hope you’ve had a nice weekend.
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