Why did you make that correlation? I don't see that at all.
The 30 year bond has reached the pinnacle of it's life. It's now a commodity. The reason it's going down and the yield curve is inverting is that the 30 year bond debt is being retired (so people rush to own it because the gov is buying it back!!), and LESS 30 year debt is being issued. I think we can all safely say that the gov coffers are growing very large, and they are now paying off debt, need less borrowing, and are even thinking of paying off some of the trillions of national debt (as the prez candidates like to tell us.....)
However, have you looked at the short money bonds? 2, 5 and 10 are all rising, and AG is going to make them rise more.
So....I would NOT expect a big spillover. I can't see the market rising "large" in the face of rising interest rates forever. Eventually, these rising rates are going to pinch expansion and earnings, and that will keep prices down.
Again......what throws a fly into the ointment is that some of these companies are not going to the debt market for financing, but rather using equity (like the money they get from their rising stock). That changes the picture somewhat, but I don't think it can wholely change the thinking of what a generic tightening of rates produces in the long run.
JMHO.
Steve
PS: The 10 year bond is rapidly becoming the new benchmark. BTW, most people don't know this, but the 10 year bond is what your mortgage rate is pegged to. It's NOT the 30 year. |
