Hi PB, Yes, I would agree that most US bond/yield charts are...

Hi PB,

Yes, I would agree that most US bond/yield charts are pointing to higher rates in the long term, despite clearly going through at least a minor corrective phase now. I'm not wedded to the idea because as you know that 10y note monthly chart has broken down out of that 3 decade long channel.




However monthly is very oversold and the trade is very crowded, so I expect some further consolidation at a minimum.

So while the charts point to higher rates for longer, I think the powers that be cannot allow that to happen. To be frank, looking at the enormity of the sovereign debt, they are going to need more than just economic growth to repair the balance sheet. They will need inflate away a large portion of it. Over the next 6-12 months, if markets continues to push rates higher, I expect to see growing political pressure on the Fed to keep rates low (ie lower than planned), and potentially raise their inflation targets. We are already seeing the snippets of this with the Kudlow comment, and Powell indicating their could be wiggle room on the 2% inflation target.

In terms of how to profit from this, i'm not aware of any asset class that has historically out performed gold in a falling real rate environment (rates minus inflation). If things play out as i'm expecting, we should see a face ripping rally at some point over the next 12 months, potentially as high as USD1700. Presently however, we are hovering around a major level that needs hold. I dipped a toe in the water last week and will monitor how it acts.