Forget Europe And China, All Eyes Are Turning To Crumbling Treasuries

Every day it seems the US markets get knocked around due to some events happening overseas.

China and Europe have been trading places as the tail wagging our dog, though last week was mercifully light on China news due to the New Year.

And seeing as they’ve just finished a round of delivering fresh economic news and a rate hike, we might expect things to be somewhat quiet out of Beijing in the near-term. The situation in Europe remains anyone’s guess.

So now the focus turns back to America, and our own unique set of issues.

Two big themes both relating to interest rates will dominate the discussion. First there’s Bernanke’s fiddling with the uber-short end of the curve (so short, even, it doesn’t actually show up). And then there’s the fresh focus on long-term yields.

That’s where the battle is going to take place.

Treasury bears have been out in force for a while, but they smell blood right now, in part helped by some recent very-weak bond auctions.

Here’s a quick recap of some posts on the subject:

  • The one chart that screams higher interest rates
  • If you thought the yield curve was steep now, you haven’t seen anything yet
  • The much-anticipated Treasury selloff is no long a matter of “if”
  • CHART: Wall Street’s gravy train is about to smash into a brick wall

So there you go. The below chart from Waverly Advisors, which we’ve run before, is a nice quick way of visualising the changing curve year over year.

bond treasuries

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