Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

US 10-Year Bond Yield Transitioning Out of Multi-Year Bear Market

Interest-Rates / US Bonds Jan 31, 2017 - 04:29 AM GMT

By: Mike_Paulenoff

Interest-Rates

My intermediate and longer term technical set-up work on 10 year U.S. Treasury YIELD argues that benchmark yield is in transition from a 35 year Bear Market (dominant downtrend) into a multi-year Bull Market (dominant uptrend).

From 1981, when 10 year yield peaked at 15.84% amid concerns about rampant, un-containable inflation and stagnant growth ("Stagflation") precipitated initially by the 1973 OPEC Oil Embargo, benchmark yield steadily and relentlessly declined to a post-Financial-Crisis 2016 low at 1.32% (see Charts 1 and 2).


From a technical perspective, I can make the case that all of the action in yield from mid-2011 into early 2017-a 5-1/2 year period-- represents a major base formation at the conclusion of a generational Yield Bear Market (see shaded area on Chart 1). That said, to confirm the end of the 5-1/2 year transition from Bear to Bull Market, yield must climb and sustain above significant resistance lodged between 2.75% and 3.30%. Yield currently is circling 2.50%.

What conditions might have to be present-or anticipated by investors-for yield to back up into and through the 2.75% to 3.30% critical resistance zone?

There are three market and/or psychological forces, any or all which must be present to propel yield higher to trigger a confirmed new bull trend: 1) actual or expected acceleration of U.S. and global economic growth... 2) incipient, rising inflationary expectations... or 3) a loss of confidence in the efficacy of the U.S. Government (that undermines the value of the U.S. Dollar).

There is little doubt that the new Trump Administration is all about ratcheting up growth from a near decade -long anemic annualized GDP of 2%, to 4% - 5%. Whether the new Administration can pull that off through proposed tax cuts, offshore capital repatriation, and domestic economic stimulus programs-that will "force" the Fed to ratchet-up rates into a new rate-hike cycle, is anyone's guess. Many stars must align for growth to more than double from the Obama years, and for annual inflation to break the 2% barrier with upside momentum.

While stronger (accelerating) growth, rising inflationary expectations, and a Fed that more than likely will be behind-the-curve , represent the core elements of a traditional expansionary, rising rate cycle, the unorthodoxy and uncertainty of the Trump Administration's policy prescriptions, and the efficacy of those policies amid a resistant and hostile globalist post-WWII world, present all manner of risks, especially to decades-long trade relationships. The dismantling of long-standing trade agreements initially could, and may irreparably, damage the relatively unrestricted flow of goods and services around the globe, which will undermine a higher growth trajectory.

Should Trump's policies encounter intense political and global roadblocks, the "Make America First Again" expansion plans might be derailed altogether, which certainly would be a prescription for continued anemic, slow growth, or even recession, and a resumption of longer term, dominant downward pressure on benchmark 10 year yield.

Under such a disrupted economic scenario, juxtaposed against the otherwise powerful technical set-up that argues for the initiation of a new bull trend in 10 year yield, I have to consider that the fallout from failed Trump growth policies could compromise global investor confidence in American leadership, weaken and damage the U.S. Dollar, and precipitate an exodus from Dollar-denominated investment paper (Treasury bonds and stocks).

Too far-fetched? Perhaps.

However, if I have learned a thing or two in my three plus decades of analyzing and participating in the financial, commodity, and foreign exchange markets, it is to never dismiss out of hand powerful technical conditions for lack of rational reasons. Markets have a way of fulfilling their destiny, somehow.

Exactly why or how 10 year yield manages to back up above 3.30% to trigger a confirmed new bull market is secondary to the continued development of the powerful technical set-up potential itself.

Have a great trading week!

By Mike Paulenoff

Mike Paulenoff is author of www.MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial!

© 2002-2017 MPTrader.com, an AdviceTrade publication.  All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Mike Paulenoff Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife