I Expect New Record Low Long Bond Yield

Every attempt of the 30-Year long bond to break out of a decades-long downtrend fails. At the end of October, the long bond yield was 2.96%. Six days into November, it's back at 2.80%. Meanwhile, short-term rates continue to rise. We are a recession away from a new record low yield on the long bond.

Despite all the economic cheerleading about the allegedly strengthening economy, I see things differently. Job growth is shrinking. Average the last two months to smooth out the hurricanes and you get growth job growth of 114,000. For now, it's still positive.

Hooray, autos rebounded. However, 100% of that rebound is due to hurricane replacement. It won't last.

Rental Vacancies Are Rising. What will that do to new apartment construction?

What growth we have is due to a diminishing savings rate . That's another hurricane aspect that won't last.

What Do You Believe?

The stock market and the 30-Year long bond yield are at odds. I believe the long bond. If the economy was truly strengthening, the yield on the long bond would not be acting like it is.

We are one recession away from a new record low yield on the long bond, and it's coming.

Mike "Mish" Shedlock

Comments (11)
No. 1-11
Blacklisted
Blacklisted

The stock market and the 30-Year long bond yield are at NOT at odds, if one realizes that foreign capital flight is parking in dollar-based assets, and it has little to do with the economy. Stocks are not constantly hitting new highs because the economy is breaking out, it's because the rest of the world is breaking down, and the big money is not going to be stuck holding euros or yen. All the dollar haters (gold promoters) have been preaching run away inflation with QE, forgetting there is a world outside the US and confidence is the determining factor. We are one recession away from Sovereign defaults, a rising dollar, more foreign defaults, and the potential default of the ECB, which will lead to an emergency G20 meeting to save govt's and banks. Who do you think will want to hold 30 yr govt paper as the world learns the world's govt's have no clothes?

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Who do you think will want to hold 30 yr govt paper as the world learns the world's govt's have no clothes? - How about the best-run government bond fund in the world - Hoisington - Lacy Hunt

Bam_Man
Bam_Man

It's merely a question of which dominoes topple first.

Bam_Man
Bam_Man

The dollar and US Treasuries will be one of the "last men standing" before they too, topple.

Bam_Man
Bam_Man

It's all in the timing.