Plan B

Back on May 18 [see: Bonds and Value] I suggested the 10Y might be a good value at 118’105 (yield of 3.11%.) The 2s10s had just reached a trend line connecting previous lows.

Ten-year yields had recently reached the top of a channel connecting previous highs.

DXY had just reached the top of a falling channel.

And, 10Y price had just reached the bottom of a rising channel.

It was an important test, as we discussed at the time.

The 10-year is at an important inflection point, poised between a strong rebound and a significant selloff.  Its next moves are critical not only from an investment standpoint, but in terms of what to expect from the broader economy.

Now that yields have broken out and prices and spreads have broken down, we’re already beginning to see the effects on the market and the broader economy.  Bottom line, they aren’t good.

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