We’ve posted several pieces on the Treasury market about the bond’s positive technicals versus poor fundamentals. The 10-year rate is now close to piercing through key resistance at 2.83 percent. It is difficult to fundamentally determine why rates are moving higher: 1) a change in economic fundamentals — stronger growth, increase in inflationary expectations; 2) sovereign credit concerns spilling into U.S. markets; 3) reduced foreign capital flows into Treasuries; 4) Fed’s QE2 decision to focus on shorter maturities.
Probably all of the above, in our opinion. The bullish case, stronger economic growth, should be confirmed by stronger equities and a sharp rally in the dollar. That is, a reversal of the weak dollar/strong equity relationship of the past year.
Nevertheless, a close above 2.85 percent would put the focus on next move to the 200-day at 3.15 percent. Stay tuned!
OK, we blew past 2.85 on the 10 year, getting close to 3%. CA muni ETF funds continue to crash. Commodities and stocks are correcting. And, certain elements of the political spectrum are beating up on Bernanke while James Grant is calling for a return to the gold standard. This week gets off to a bad start. Whoa boys, all work and no play makes for a not so dull market.
And you thought you have it rough. Cramer was pounding the table on Gold before the recent collapse. Can’t wait for John Stewart…