Today’s price action in the long bond is highly suggesting that the multi-decade bull market in US bonds is over. The inflationary impact off three successive experiments in Quantitative Easing has seemed to have finally gotten the attention of that endangered species once known as the bond vigilante. Remember, this latest round of QE is not targetting US Treasuries but rather agency debt. That removes a major source of demand.
With the US Dollar falling apart thanks to a deliberate attempt by the Fed to debauch it, buyers, particularly foreign buyers, are going to demand higher rates to compensate them for the currency risk.
Either way, today is shaping up to be a big day for the future of long term interest rates.
Author: Dan Norcini