Is This The Most Important Chart In The World?

"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.


fx Mementoil Wed, 12/27/2017 - 04:15 Permalink

Fake breakout (if there will be a breakout at all in the 10year), then relapse, yields grind towards new all-time lows (as a US  recession in 2019/2020 looms ever larger), specs get killed with their longs,cover near the low, FED starts QE5&6 rolled into one, economy narrowly avaoids recession or it is just a shallow, aborted one, yields start to clomb back towards 2 %, rinse. repeat, with lower lows, lower highs, until the entire thing becomes unglued and the fiat world currency system blows up...

In reply to by Mementoil

zebra77a fx Wed, 12/27/2017 - 05:20 Permalink

No Fiat in History has ever not eventually been diluted into zero.  It's owners have never been able to resist the temptation to print Moire!As they destroy all semblence of wealth it only adds rocket fuel to the only thing they have not been able to dilute - Cryptos and Bitcoins..

In reply to by fx

ShrimpinAin'tEasy pascal bets Wed, 12/27/2017 - 07:33 Permalink

As they destroy all semblence of wealth it only adds rocket fuel to the only thing they have not been able to dilute - Cryptos and Bitcoins remind me again what cryptos & bitcoins are "valued" in (factoring in the scenario that the dollar will eventually be worth zero). Based on yesterdays article, I guess one bitcoin is worth 1/10th of a Lambo. Kinda hard to do fibonacci retracements using those metrics though.

In reply to by pascal bets

troubadourcapital Golden Showers Wed, 12/27/2017 - 04:10 Permalink

If you look at the 2 year treasury yield. It is extremely overbought on every single time frame: daily bar chart, weekly, and monthly.

So a breakout right now is unlikely
More likely scenario: a multi-month pullback or consolidation in yields (to washout momentum) before rates break out…

In reply to by Golden Showers

Dump Wed, 12/27/2017 - 06:00 Permalink

US yields will go ballistic when lenders decide the US cannot repay purchasing power in USD.By the look of the T10Y chart it will happen sooner rather than later.At that point there will be nothing the Fed can do.Goodnight Irene.

pascal bets Wed, 12/27/2017 - 06:22 Permalink

Nope.  The one chart most important is my trading account going UP. Just looked at futures.  SHEPWAVE is calling it again.  Thanks ZH!!  Good trading.

Let it Go Wed, 12/27/2017 - 06:31 Permalink

For a long time, it has appeared the whole world is trapped in an easy money low-interest rate environment with no way out. This is a sign that in the future a massive problem is developing and it holds huge economic ramifications and a major risk.Many of us have a problem lending hard earned money out for a long period of time and we should be wary. Rates are based on predictions of future government deficits and events around the world that may or may not unfold as expected. If the bond market is indeed a bubble the implications of its collapse will be massive and such an event will not only affect bondholders but will test the economic foundations of both the country and the world. Bond holders would be stripped of wealth and soaring interest rates will magnify the nations debt service and rapidly impact our deficit. More on this subject in the article below.  http:/Bond Market Bubble ending Has Massive Ramifications .html

mo mule Wed, 12/27/2017 - 06:49 Permalink

sheepwave, it might do this, or could do that, but if it don't do that, or do this then it could do that, but then again we have to careful b/c it can still do this or that? watch this line b/c if breaks it then goes back up and then breaks it again it might be something, then again we need a 3rd break of this line for it to be something, maybe but then if it could it would be a break of this but we need a 5 wave or could be a 3 wave reversal or could be a 4 wave, if it's a then 3 wave then with 5 wave and ABC pattern but it may???????????...........

Ink Pusher Wed, 12/27/2017 - 07:12 Permalink

Most obvious chart in the world maybe. \Especially when they keep printing money backed with nothing more than hot air coupled with double indemnity high interest debt.We all knew that the Bonds were not going to yield.Anyone that bought into the 30Y Fantasy is playing the ' LONG & GONE ' game.There are easier and less painful ways to engage in mass suicide.My suspicion is that Kool-Aid stock is going to breakout and go huge.