30 Year Bond Tumbles on Bernanke Comment (Chart)

By Bob DeMarco
All American Investor

The 30 Year Bond tumbled 3 points on disappointing comments by Federal Reserve Chairman Ben Bernanke.

It appears that no new bond buying by the U.S. central bank is imminent and this triggering the biggest sell-off in three months.

Ten Year Treasury Yield in Orbit (Graph)

The sharp rise in the Ten Year Treasury note yield will come as no surprise to readers of this blog. We forecasted this development, based on Federal Reserve and Treasury policy, several months ago when we pointed out that once the yield exceeded 3.125 percent, it was up up and away on our beautiful, beautiful money machine.

Our new song is, there ain't no stopping it now. Oh, the Treasury will come in and buy some size in longer dated Treasuries and mortgage back securities, forcing a short lived, temporary drop in rates from time to time.

As you can see if you look at the red line on the chart, this market continues to stay overbought. This is not a negative sign, quite the opposite, it signals the enormous strength of this trend up in interest rates.

Expect the Fed to defend the 4.00% with both hands and both feet. It will be interesting to see if they can stem the tide of rising interest rates in the longer end of the market.

This rise in ten year interest rates has lots of negative implications. However, the single biggest negative is simple --the refinancing boom is over. With mortgage rates well over 5 percent now, the economics won't work for the vast number of mortgage owners that refinanced in prior drops into the current area.

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

More from All American Investor

• Ten Year Treasury Yield in Orbit (Graph)
• Ten Year Interest Rates Rising (Chart)
  
• Systemic Risk Defined--Too Big to Fail
• Ray Dalio on the current state of affairs in the market
• Roubini Predicts U.S. Losses May Reach $3.6 Trillion
• Option ARM--The Toxic Mortgage
• 60 Minutes -- Cold Fusion

Kindle: Amazon's 6" Wireless Reading Device

Ten Year Interest Rates Rising (Chart)

Ten Year, Interest Rate View, Chart, Monthly Bar Chart



The Ten Year Note interest rate continues to rise. Right now, it is somewhat overbought.

Long term interest are on the rise. The FED continues to try and hold interest rates down. This is reflected by the steepening of the yield curve.

The bad news here is that mortgage rates are driven by the ten year yield and are now above five percent.

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Kindle: Amazon's Wireless Reading Device (Latest Generation)

Follow All American Investor on Twitter

Ten Year Treasury Perspective (Chart)

Notes:

• Every time I look at this chart I think about 1978-82.
• During that period it was not unusual to watch the 3 month Treasury bill move 50 basis points in a day.
• On a slow day the trading range in the Ten Year was a point and one-half.
• Interest Rates on the Ten Year Treasury rose over 15 percent. Mortgage rates also moved above 15 percent.
• Everyone was so bearish they wouldn't touch the Ten Year or Long Bond.
  
• I continue to ask myself, will we see double digit ten year Treasury rates again?
• The obvious answer is, YES.
• Flash forward 30 years.
• The Ten Year is trading at 2.91 percent. Will rates ever go up?
  
• It looks like the Ten Year is making a low in this area.
  
• A close above 3.125 percent would indicate higher interest rates and a trend change.
  
• I learned a long time ago that trends start when you least expect them.
• Once a trend starts it tends to persist for a long time.
• One thing I know for sure -- rates always go a lot lower, and a lot higher than you could have ever expected--at the extremes.
• Investors should be thinking about ways to take advantage of increases in interest rates.
• Once rates start up they should do so for many years.
  

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.