Guggenheim: "3% Is The Beginning Of The End"

Tyler Durden's picture

The debate over what yield on the 10Y spells the end of the 30 year bond bull market, and would spillover into selling among other asset classes, is heating up.

Earlier this week, in his monthly annual letter Bill Gross wrote that 2.6% is the only level for the market that matters: "This is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the Dollar/Euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017."

Later that day, during his webcast with investors, Doubleline's Jeff Gundlach slammed Gross as a "second tier bond manager" for his "forecast", and countered that 3.0% is the magic number: “the last line in the sand is 3 percent on the 10-year. That will define the end of the bond bull market from a classic-chart perspective, not 2.60%” as Gross suggested.  He then added that “almost for sure we’re going to take a look at 3 percent on the 10-year during 2017, and if we take out 3 percent in 2017, it’s bye-bye bond bull market. Rest in peace.”

Today, a third bond manager joined the frey when Guggenheim's Scott Minerd sided with Gundlach and said that 10-year yields could end their long-term trend if they rise above 3%.

“It’s basically the beginning of the end,” Minerd told Bloomberg Television. “Long-term trends like this don’t reverse quickly,” he added, saying yields might spend several building a new base before taking off."

Minerd also said the Federal Reserve risks falling “behind the curve” on the U.S. economy and needs to raise interest rates in March, a step that markets see as far from certain. Futures trading implies a roughly 30 percent chance, according to data compiled by Bloomberg. The fund manager also said that while stock markets may be volatile as President-elect Donald Trump takes office, his policies ultimately can provide a “potent mix” for economic growth. The S&P 500 Index, now at 2270, is likely to end the year in the 2450-2500 neighborhood, according to Minerd.

However, he cautioned that markets continue to disagree with the Fed's dot plot signaling where rates are headed, which makes “the market is vulnerable to a tantrum."

Also, he said that "as the business cycle ages, in 2019, 2020 when we could anticipate we might have another recession, that there will be another deflationary burst that will bring rates back down if we do get above 3%, but we haven't violated that trend yet."

We have little to add to this pissing contest about whose prediction about the number that marks the end of the bond bull market will be right, suffice it to say that it truly is a bizarro world when some of the smartest bond managers are arguing over some squiggles on a chart.

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Croesus's picture

They're all wrong. 2.80% is the number to watch...if it gets there, we take out 3%, no sweat.

JamesBond's picture

I stopped reading after, "We may have another recession."  What an ignorant tool.  We never exited the depression.

 

jb

saveUSsavers's picture

This twitchy-arsed cockroach been pumping markets for 10 years! FKING TOOL says NOTHING about the most expensive market in history, fumigate all cockroaches!

3% is where all the super-rich cockroaches move almost entirely into CDs !

Antifaschistische's picture

I know these guys are are smart....but the reason why we have had zero percent interest rates isn't because of a "business cycle" or a "trend".   it's because the Fed and it's financial assassins have bid up the price of bonds with their electronic counterfeiting operations.   There is no "trend".   

Iconoclast's picture

Got a couple of minutes to post how the fall out/domino effect in markets etc will then take shape in your opinion, after we hit 2.8%? Thanks in advance.

SunRise's picture

So 2.6% can be right and so can 3% or something else instead.

Mr.T.likes.finance's picture

So Guggenheim's guess is the deflationary burst will come in 2019/2020 ... let's see about that. My guess is it'll be earlier.

squid's picture

Ding-ding-ding..... a winner for this line, "So Guggenheim's guess is ....".

 

Damn straight, and that's all it is, a guess. As good as yours or mine.

 

 

Squid

cowdiddly's picture

> 3% on the 10, life as we know it ends for the entire Western world.

Well at least as you money managers know it. For me. not so much.

Not going to happen. it can't without blowing up Everything, and I do mean everything.

sux to be you if it does.

 

wizteknet's picture

lets reach 2.8% 1st/ 2.6 2.3

overmedicatedundersexed's picture

don't worry they will back those bonds with confiscated $100's and $50's..evil cash..remove 80% of circulating cash has gotta be good?? no??

MikeM54's picture

This article is not very well edited. 

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) MikeM54 Jan 13, 2017 11:57 AM

MikeM54, Your spam post, below, has nothing to do with the article.  Instead of discussing your off topic post, lets talk about this:

NEVER TRUST A COMPANY THAT HAS TO RESORT TO A FLOOD OF OFF TOPIC SPAM COMMENTS FOR ADVERTISING.

This failed trader, now a spamming organization, has **many** spam accounts on ZH. Note how they are always the same accounts, posting off-topic spam, then they use their other spam accounts to praise themselves, giving themselves thumbs ups, and ripping into people asking them to stop the spam flood. They spend an enormous amount of time spamming becasue their time spent spamming makes them money, unlike their time spent trading and doing analyses.

The spam accounts are (not doubt they have more) : AliSONY, Babs.St.Louis, Billy G, Chi Juan, Dr.Carl, ErikE, FemDayTrader, Irvingm, jasony, John Beau, KC Spike, MadhyaBharatx, MexInvest, MikeM54, Mon T, P Christmas Carole, Penny Trader, Pinky and the Brain, RonnieM, Sonya B59, Stan Your Man, StevieTexie, Van G, Virginia Wooolf, and wisetrader224

MikeM54's picture

These two charts here prove that this article is a whole lot of speculation:

https://pbs.twimg.com/media/C19vq1yXAAAwoup.jpg

https://pbs.twimg.com/media/C19vpHfWIAACIYP.jpg

 

About 30 years a small group of analysts and advisors left Goldman Sachs because of the company's crookedness. What you see above in the charts is the proof that this small group is giving solid forecasting analysis while all the rest of the analysts just spin their wheels.  

MikeM54's picture

I think there are a lot of people on ZN and in general who really live in a cloud of cluelessness. They tend to make things more difficult for themselves and that hinders their progress and financial success.

 

That is my opinion anyway. Maybe I need some coffee. I am getting too phiolosophical for 5:45 in the morning.

 

Dread going out into the cold dark Chicago morning. 

 

Lost in translation's picture

I'm confused.  Did you mean 5:45 or 5.45 x 39..?

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) MikeM54 Jan 13, 2017 12:00 PM

The real "cluelessness" is your failed trading company that has turned into a spamming company.  Talk about desperate!  Spamming is where the money is for you guys.  Total trading FAIL...

NEVER TRUST A COMPANY THAT HAS TO RESORT TO A FLOOD OF OFF TOPIC SPAM COMMENTS FOR ADVERTISING.

This failed trader, now a spamming organization, has **many** spam accounts on ZH. Note how they are always the same accounts, posting off-topic spam, then they use their other spam accounts to praise themselves, giving themselves thumbs ups, and ripping into people asking them to stop the spam flood. They spend an enormous amount of time spamming becasue their time spent spamming makes them money, unlike their time spent trading and doing analyses.

The spam accounts are (not doubt they have more) : AliSONY, Babs.St.Louis, Billy G, Chi Juan, Dr.Carl, ErikE, FemDayTrader, Irvingm, jasony, John Beau, KC Spike, MadhyaBharatx, MexInvest, MikeM54, Mon T, P Christmas Carole, Penny Trader, Pinky and the Brain, RonnieM, Sonya B59, Stan Your Man, StevieTexie, Van G, Virginia Wooolf, and wisetrader224

John Beau's picture

Excellent job of predicting gold and market moves.  I think most people on ZH have probably never actually seen an analyst who could do that. Too used to hype and being perma beairsh for too long.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) John Beau Jan 13, 2017 12:02 PM

So we should trust a failed trading company that has had to resort to spamming for money.  LOL!!!  You all are funny!

Your spamming accounts: AliSONY, Babs.St.Louis, Billy G, Chi Juan, Dr.Carl, ErikE, FemDayTrader, Irvingm, jasony, John Beau, KC Spike, MadhyaBharatx, MexInvest, MikeM54, Mon T, P Christmas Carole, Penny Trader, Pinky and the Brain, RonnieM, Sonya B59, Stan Your Man, StevieTexie, Van G, Virginia Wooolf, and wisetrader224

BandGap's picture

Wonk wonk wonk.

Keep stacking PMs, cash and ammo.

Wonk wonk wonk.

Flankspeed60's picture

".......his policies ultimately can provide a “potent mix” for economic growth."

They better, 'cause the knock-on effects to our government debt will be breath-taking.

Money_for_Nothing's picture

10 year will hit 6% in the next 4 years. After that will stay above 5% till sometime after 2025.

Over lending and interest rate suppression. Political economic distortion (perversion?). Capital flight. Repatriated dollars. Massive dollar shortage worldwide made even worse by normal interest rates.

Reversion-to-the-mean (humorously) bitches.

overmedicatedundersexed's picture

hold frn's ..you will get great exchange rates for any other nations money..remember when I could sell a $5 bill on the black market in an asian country for 20x the official rate in local currency..deposit the local currency in a big international bank branch and do it again..criminal only to the elite mafia running the world..so put me in jail.

johand inmywallet's picture

Also, he said that "as the business cycle ages, in 2019, 2020 when we could anticipate we might have another recession, that there will be another deflationary burst that will bring rates back down if we do get above 3%, but we haven't violated that trend yet."

 

Someone nneds to tell this elitist that we will not and have not left this current DEPRESSION for some time.

I know, financial guru!!

Lost in translation's picture

"...we could anticipate we might have another recession..."

I was unaware that we ever left the last one, nay, that we were in anything except a depression.

Please, by all means, correct the snot out of me with a tire iron if I am misunderstanding something/anything, here...