The idea was that the Fed needs the market to crack because the Fed does not want to see bond yields get out of the barn and blow the whole gig, long-term (or something along those lines).
The idea was that a handy stock market liquidation was just the right elixir and that those thinking the Fed was going to roll over and make nice the minute the market hiccuped – as it did during the fiscally repressive Obama years – would be disappointed.
10yr yields continue to pull back today.
30yr yields are pulling back as well, after not quite reaching the pattern’s target of 3.5%.
And so for now, the Continuum lives on. It’s still in breakout mode, but looking much less confident in itself than a couple weeks ago when we noted the hysteria was getting over baked: Bond Bears Next to Get Clobbered?
Sure, we know all the reasons that yields are supposed to break out and maybe the Fed (and Trump) will lose control and they will break out this time. But as noted so often over the last month why not tap the breaks on that story, especially given the sentiment backdrop? Here’s the bullish Commercial Hedging data for the 30yr bond as per the October 10th post linked above.
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