Happy hump day y’all. While I am a firm believer in yields continuing to rise over the “long-run”, especially on the heels of great December private payrolls data, two of the bloggers I follow tend to disagree as far as the near-term. If you are like me you have been positioning for rising rates gradually since 2012… but this kind of analysis may make you second guess completely dumping any government bonds you own before the next taper:
- Where Are Interest Rates Going? (All Star Charts)
- Update on 10yr UST yield and equities (Charts etc)
This was a good statement made in the Charts etc article:
Commercial hedgers, typically the smarter money, are currently very long the UST note, attaining their highest level of long exposure in years. In the past, when their exposure has reached elevated levels (beyond 200K, green horizontal line), the UST note has more often than not responded by rallying. If that were to happen in the near future, I would expect equities to stall or retreat in kind.
Here’s some more supporting data on the potential for a near-term “shakeup” in equity markets based on current sentiment data.
Good stuff to consider if you’re bullish like me… hopefully it keeps us honest.