Today’s chart of the US 10 year Treasury Note (T-note) is simple and stark and comes from Colin Twiggs new daily blog, which captures his Trading Diary sent to Incredible Charts subscribers*.
Colin states the risk in the long term bull market in bonds quite clearly:
A “bond market revolt” is a general sell-off of Treasurys when bond-holders decide that rewards (yield) are not commesurate with the risk. We have already witnessed several bond-holder revolts in European markets. A rise in yields would raise the cost of rolling-over existing Treasury debt, ratcheting up the budget deficit even further. This is a threat that should not be ignored.
However, it should be equally mentioned that Japanese bonds are still at record lows, decades after the financial collapse in the 1990’s. Although that too has been described as a threat, eloquently by roguish hedge fund manager Hugh Hendry, who said so before the terrible events of Fukushima as “a nuclear bomb tied to the chest of the worlds second biggest economy”.
*Disclosure: I’m a well satisfied paying customer of Colin’s Incredible Charts program and data-feed.