Posted by on December 27, 2017 7:30 am
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Categories: 30Y Bond CAPTCHA economics Economy Finance Fixed income Fixed income analysis money Speculative US government Yield Yield Curve

“This is possibly the most important chart in the world…” As 13D Global Strategy and Research noted:

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.

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