The US May Have A Serious Bond Problem Ahead


The market knows that, even though Yellen keeps on denying it in public, the Federal Reserve is thinking of rate hikes: here is the opinion on the issue given by the bond market

“Hello Mr. Bond Market, do you think that the Federal Reserve will keep rates low for a very long time as Fed Chairwoman Janet Yellen keeps on repeating to the World ?”

“Hello, let me answer by showing a graph:

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Now this is the answer to Yellen’s words on the impossibility of short-term rate hikes: we don’t believe you.

As the graph shows, TLT has recently broken the triangular resistence placed at the 113 level.

When prices go down, yields go up. You all know that yields and federal rates tend to move together.

Janet Yellen (as BOE’s Carney already did) should just break it to the market: “Hey everyone, do you remember that thing I said about rates just few days ago ? Well… let’s say that we need to sit down, take a deep breath and say it: rates are about to go up”

Why doesn’t Yellen do that ? Because she perfectly knows that the announcement would literally destroy Wall Street. She’s trying to say to the market: “Hey…psst ! You say it, I can’t !”

The Federal Reserve will increase its rates within the next 12 months, and the bond market knows it.
When will the equity market get it too ?


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