It sure looks like the 40-year bull market in Treasury bonds is over.
Of course, interest rates bottomed way back in July of 2016 – when the yield on the 10-year Treasury note dipped below 1.4%. And, since bond prices move in the opposite direction of bond yields, Treasury bond prices peaked at the same time that interest rates bottomed.
Interest rates have pushed higher since then, and bond prices have fallen. But there never seemed to be any sort of wholesale selling of Treasury bonds. Interest rates just gradually moved higher, and bond prices quietly moved lower. Yet, every Treasury bond auction since for the past 18 months has had crowds of investors lined up to buy.
I suspect, though, that’s about to change.
You see, the long-term monthly chart of the 10-year yield is about to do something today it hasn’t done in 40 years. It’s about to make a “higher high.” Take a look…
Monthly charts are best used to illustrate super-long-term trends in asset prices. For the past 40 years, the 10-year yield has been falling. The monthly chart shows a constant and persistent pattern of lower highs and lower lows. Until today.
Data points on this chart are only included at the end of the month. And, if the 10-year yield closes today anywhere near where it closed yesterday, we’ll have the first “higher high” on this chart in 40 years.
That will mark a significant breakout above the declining resistance line on the chart. And it will signal a major reversal from a bear market in interest rates (a bull market in bond prices) to a bull market in interest rates (a bear market in bond prices).
This is a once-in-a-generation change in trend. For the first time in decades, your bank’s money market account may be a better place to park your cash than the Treasury bond market.
Best regards and good trading,
Jeff Clark
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