We made the case a month ago that the secular bond bull in USTs was likely nearing its end.
Since then, yields on the 10 Yr have risen 25%, as we pointed out yesterday.
As the monthly charts of 10 and 30 Yr UST prices show below, the recent spike in yields have a good deal to do with the fact that prices were facing multi-decade channel resistance a month ago.
Historically, this resistance has sent prices packing to the low end of the channel at support.
Given all of the above, we maintain the belief that bond prices likely have seen their secular peak and/or are very close to seeing it and will likely decline on a sustained basis over the longer-term now (we are not calling for a massive increase in yields though – see the Japan comparison from our 7/17 post).
However, as the weekly charts show, on a shorter-term basis, the recent sell-off in 10 and 30 Yr USTs have taken both to rising support lines.
Such support could produce a rally in prices and a decline in yields in the near-term, despite our belief that the path of least resistance for each is in the opposite direction over the long-term.
Any bounce in prices and decline in yields could coincide with some sell-off in risk assets – again, in the near-term.