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We had previously speculated that the 30-year bond rate would continue downward to around 2% based upon a number of very long-term charts. Short-term charts, however, are showing strong technical evidence that interest rates may be turning up in the long term. Words: 267; Charts: 2
So writes Carl Swenlin (www.decisionpoint.com) in edited excerpts from his original post on the Pragmatic Capitalism web site* under the title Are Interest Rates Turning Up?.
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Swenlin goes on to say in further edited excerpts:
The monthly chart below shows bond rates going back to 1948, at which time long bond rates were about 2%. After the 1981 peak, rates have trended downward toward, we assumed, the historical low. Now it appears that the bottom is in and that rates are heading higher.
Note that the monthly PMO has turned up from its second most oversold level in 50 years, and has crossed up through its 10-EMA, rendering a PMO buy signal.
Zooming in on a 23-year monthly chart we can see a long-term double bottom (2008 and 2012). This compares with the lower PMO low, which sets up a reversal divergence (bullish). We can also see that yield has broken above a declining tops line drawn from the 2011 top, confirming the double bottom. The most important thing that needs to happen next is for yield to break above the declining tops line drawn from the 1994 top.
Conclusion
We think that interest rates are making a long-term turn to the upside. The long-term double bottom in yield, plus the monthly PMO bottom and upside crossover are very significant events, indicating that a long-term bottom is in place.
If rates do continue to rise, that will have an extremely negative effect on just about everything.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://pragcap.com/are-interest-rates-turning-up (© Copyright 2013 — PRAGMATIC CAPITALISM. All Rights Reserved; Subscribe to Pragcap)
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