Chart of the Day: Bond Yields Break Down Again

The market is roughly flat in early trading. Yesterday, the Fed released its latest statement that indicated that they will remain extremely accomodative with monetary policy. It looks like they have no intention of raising rates anytime soon, and stand ready to inject more easing if necessary.

In the chart below, you can see that earlier this month it looked like bond yields were poised to break above their multi-month downtrend line (see pink line below). But yesterday's reaction to the FOMC had bond investors rethinking their position, and the rush to buy more bonds pushed yields back down near the 2.50% level.

At some point, the bond market will worry about all of this monetary stimulus and its potential effect on inflation. I also think that our fiscal budget concerns could lead to higher rates in the coming years. But for now, betting on an imminent rise in bond yields has been a losing bet, so one needs to remain patient.


long TBT