updated: Mar 4, 2020
We called the top for 10Y yields on October 10, 2018 [see: Plan B] with rates at 3.24% and ZN at 117’230. Since then, prices have rallied about 15%.
…I’ve always been inclined to believe more in the yellow channel — which says that 10Y yields have now topped and ZN has bottomed.
The price chart has been clear ever since December 2018 [see: December 26 Update on Bonds] with a critical target of 130’200 – 130’230…
…updated to 133’025 in August 2019 [see: Aug 7 Update]… 
…and adjusted to 132’100-135’155 in January 2020 [see: Bonds: More Turmoil Ahead.]
Yesterday, it reached and pushed past our 135’155 target – the highs last seen in July 2012.
With both the 10Y and 30Y tumbling to all-time lows, what might lie ahead for bonds? Is there still more upside in store? And, what does it mean for stocks?
continued for members…
Last August, we were looking for a test of the previous 13,36 lows which, if they didn’t hold, would yield a test of the purple 1.618 at 12.84 in October or November. 
What I didn’t anticipate at the time was an extended year-end saving bounce that would delay the decline to new lows into early 2020.
The same math applies today as it did then:
If, at the end of the day, 1% breaks down, the next legitimate support doesn’t arrive until the 1.272 at 8.16 or 1.618 at 1.54 — as in 0.154%. If the falling purple channel held together all that time, we’d also have the yellow channel .236 line around 5.25 in May 2020 — about the same time SPX is arriving at 2138. The last target is around election day, 2020 at -0.2%.
It’s easier to see on the big picture, which illustrates that five of TNX’s six lows have occurred on a regular cycle of roughly every 4 1/2 years — the one exception being in 2007 when the Fed was trying desperately to stave off the GFC. The next cycle low lines up nicely with -0.2% in November 2020. This is the chart posted in August…
…and the current version:
…which shows a tag on the channel bottom and 1.272 late yesterday.
Let’s also not forget about the breakdown/breakout chart for the 2s10s. Every time 2s10s has broken down (the yellow TLs) SPX has suffered. But, the most serious damage has been done when, after a dip into inverted territory such as occurred in August, the 2s10s breaks out above a significant TL (shown in red.)
Think of the falling yellow dashed trend line as cocking the gun, and a break above the red TL as pulling the trigger. We had a false start in December when a breakout above the solid red TL was quickly retracted. In turn, it established a higher/flatter purple TL which, when broken, could now serve as the trigger.
Here’s the same chart with SPX added in.
And, here’s the more detailed model we’ve been using on a daily basis for over two years [see: Does the Yield Curve Matter?]
Last, let’s remind ourselves of the reason why all of this is happening. I need to update the chart, but you get the idea. Rates are cratering because they must crater. Central banks understand this, and are doing the only thing they can to avoid default.
Deficits and debt continue to explode higher and are now compounded the presence of a global pandemic which threatens to destroy supply lines and decimate global demand at a time when many economies already exhibit weakness.
Had markets been allowed to clear in 2008-2011, things might have gone differently. Instead, central banks have pumped trillions of dollars into markets — money that has to go somewhere. As multiples expand and risks continue to rise in the equity markets, that money is increasingly open to accepting negative rates in treasuries — where there is at least the presumption that you’ll get (most of) your money back.
Much of that money, of course, is more than happy to follow the path established by algos. As long as currencies, oil and VIX can be manipulated to ignite purchase orders, multiples will continue to expand – especially if TNX can manage to hold 0.9%. If/when it drops through yesterday’s lows and tags 8.16, carbon-based investors will have another chance to wonder if this is the alarm to which they should pay attention.