Is This The Most Important Chart In The World?
A breach of the top-line of the channel could signal a major reversal in the multi-decade downtrend in UST bond yields.“
So the question is – is an event engineered to slam rates lower, in order to avoid interest expense soaring beyond US government capabilities; or is the event a reaction to over-exuberant bubble-fueled positioning in risk assets?
What is perhaps most worrisome for that channel breakout is that speculative traders have almost never been more net long the long-bond…
In 1998, 30Y yields jumped from under 5% to almost 7% in the next year.
In 2004, 30Y yields extended their drop after peak positioning (from 5% yield to 4%) in the next 3 months.
In July 2016, 30Y yields spiked from 2% to well over 3% in the next 4 months.
So what will happen this time?
Even after one of the worst 3-day steepenings of the yield curve last week, specs failed to cover…
And today bonds are bid further.