CHART OF THE DAY: The 30-Year Treasury Market Massacre

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From a market standpoint, this is undoubtedly the story of the day.

Yields on 30-year bonds are surging (via Bloomberg).

So what’s going on?

In the era of the Euro crisis, a lot of people associate rising rates with sovereign worry, but that’s definitely not the story here.

The story is that all year, even as the stock market has rallied hard, interest rates on US Treasuries have stayed ultra low, much to the confusion of people. This has been confusing to people because if stocks are rallying, and things are getting better, it stands to reason that people would shift money out of Treasuries, causing yields to rise.

So the key here is that rising rates should not be seen as some worry (the way it would be in Italy) but as a new stage of the big risk on move that we’ve been seeing all year in the stock market.

And it’s also important to realise that this interpretation is being corroborated in other markets.

The yen has been getting demolished for a while, and remember, the yen is a currency people buy when they’re feeling nervous. When people are selling yen, it means people are investing elsewhere and looking for yield and return.

So the theme of markets is that the last “Risk Off” holdouts (Treasuries, the yen, gold, etc.) are all getting creamed, while pure risk assets rally. Interesting development.

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