Have US Treasury Yields Bottomed? Are You Sure?

The consensus view is the Fed will hike 3-4 times in 2018 and that treasury yields long ago bottomed. Agree? I don't.

US Treasury Yields 1998-Present

The above chart suggests it is far too premature to believe that long-term yields have bottomed.

US Treasury Yields 5-year Duration and Under 1998-Present

Other than zero-bound 3-month treasuries, it is difficult to present a clear technical case that even short-term rates have bottomed.

And given that a huge percentage of the world's bonds trade at negative interest rates, one cannot make a legitimate case that any bond yields have bottomed.

Mike "Mish" Shedlock

It's a race to a BOTTOMLESS pit as the negative interest "can of worms" has already been opened.

Yields will have bottomed, when enough Americans have grown up sufficiently, to make default an option even Kramer and the rest of the investor drones can’t manage to miss. Then Big Foreign bond holders will scream bloody murder, and “remind” Americans of all the scary imaginary hobgoblins that lie in wait for those who don’t embrace their slave status with sufficient enthusiasm. To which the Trump voters will respond with: It’s Us vs The Foreigners! They took our jobs! We’re not paying them a dime! And then yields will rise. Unfortunately, it looks like we’ll be, if possible, even more like Venezuela than we already are, before growing up is in the cards.

Its pretty hard to consider any market in isolation. Euro junk is yielding less than UST?

The Fed asserts that it controls interest rates. If it does, it is hard to imagine it allowing much increase, as for every 1% rise in the discount rate, at some point Treasury debt service costs rise $200 Billion.

Mish is close to being the last Deflationist. We've got an inflationary Fed, ALWAYS an inflationary fiscal policy & inflationary tax reform looming. I don't see how interest rates go lower without a recession & major market correction.

1) The SPX possibly had a buying climax on 11/30 on high vol. and the fast response the next day.

2) $UST5Y resistance line should be the tops of 1989, 2000 & 2007.

3) the bottom line of the 5Y channel is much more interesting than the resistance line. It 's immerse with all other short duration rates. The 3M have the same resistance (top) line, but the distance from the support line is wider.The lows, are higher lows and the whole period of hugging the zero line since 2008 to 2015, the 3M, relative to the channel support line, was rising with zero volatility , and lately spiking up, approaching the resistance line. The channel don't care about the zero line. We do. if the 3M will be above the 5Y it will hit the resistance line, it will probably be a spike. After spiking up, 3M might go in direction of the to the support line, or even spike down below the zero line.

The rates can go negative...if there is a race for money to get to safe harbor. ZERO is not the bottom, it's just the beginning. Losing -3+% is better than losing 100% if certain asset products blow up like derivatives, bitcoin, real estate bubbles and so on. That will be a lot of money. The FED may drive it negative to flush out money that's hoarded and give banks a way to steal money from you to compensate for loss of lending revenue.