SO, agree with you that the market isn't exactly dwelling on the rates picture here. however, there is more to rates than just the long bond. at the short end, rates have risen even more spectacularly, e.g. t-bills have made a major move down lately. i continue to believe that the credit markets are sensing the possibility that all that printing of money the Fed and other CB's are engaging in will eventually let the dreaded inflation genie out of the bottle.
IF the interest rate picture eases up a bit from here, we may well see a continuation of the rally in stocks. otoh, if rates continue their ascent, we may be in for a rapid and surprising adjustment...
everybody is mesmerized by the action in the most speculative market segments, and yet, utilities and transports are clearly in a bear market (utilities are positively crashing) and the market's internals reek.
it is simply not a sign of a healthy bull market when a/d, NH/NL and the interest rate backdrop all deteriorate profoundly.
not to mention the euphoria evident in call options speculation, which has risen to a whole new level...the sentiment polls are revealing an extreme bullish bias as well btw., with Consensus Inc.'s bullish consensus going from 20% to 60% in the last five weeks.
it seems to me that a majority of market participants is now utterly convinced that a rally into spring is somehow cast in stone.
as for the rate on the long bond, how high it can go depends mainly on the stock market imo. if stocks should experience a sharp fall, presumably some asset re-allocation into bonds would result. otherwise, i have not much hope for interest rates. the printing presses have never inspired the bond market....
regards,
hb |
