The 3% Barrier: Why the Generational Bull Market in Bonds May Be Over

Some say 3% on the 10 year is not a big deal -- that's it's still a historically low level.

Reality: A generational bull market in bonds may be over.

One pundit this morning proclaimed that it only matters to the Algo's.

Really?

Below is a quarterly TNX encompassing the entire bear market in yields (bull market in bonds).



From my perch, this looks like a genuine breakout versus the Pinocchio over the long-term trendline in 2007.

There are 3 big drives to the low which supports the idea of a base for an advance.

Additionally, there was a Rule of 4 Breakout over a declining 3 point trendline from the 2007 peak, which underpins this follow-on breakout.

10-year yields hit a 4-year high yesterday.

Until this week, the dollar has been conspicuously unable to rally on the heels of higher yields.

If the dollar can't rally more than it has with higher yields, it may mean the market is demanding higher yields for owning dollar-denominated securities.

Why? DEBT.  In the last 10 years, the Fed's balance sheet went from $900 billion to $4.5 trillion just by printing money.

QE and prolonged zero interest rates were a temporary bandage.

The Debt Band-Aid is being ripped off.

The only question is whether it will be quick or painfully slow.

This is the big story.

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