Yields Climb HIgher Still

Weekend Feb 21, 2021

How it all began, the bull market back in  1982 that is

The 1970s was a decade of hyper inflation. Yields bottomed about the year I was born, 1948, then as now around  2%. Yields finally peaked about  1981 around14%.

Volcker then FED Chair, let rates soar until it was just not profitable to borromoney That was the peak.

The DJIA had peaked at 1,044 in  1966 and again  1972, it then collapsed 50% to  577 buy Dec 1974.  It would not recover for a near decade. IN  1982 it was about  800.

But as yields began falling, investors discovered the stock market. The drop in rates finally 18 months ago to zero or negative rates in Europe, propelled stocks to  31,000, no one wanted a CD or T Bill.   We are now turning that around. Rates have bottomed and long dated rartes are soaring on a percentage of change basis.

Now here is the weekly chart for perspective.

Once this bond market turns to higher rates it has a habit  of not looking back.  2.4% is overhead resistance but the way Congress is spending money that may not mean much.  Looks like we are in a third wave up now.

NDX in Parabolic Rise

Eventually higher rates will draw money from stocks, the reverse of  1982, I have no idea when that top occurs but NDX does look parabolic.

this would certainly be a fitting end to a  1982 - 2021 bull market.

At this point there is not much else to be said, bank stocks are soaring which further confirms the market belief of higher rates ahead.

Team Biden and the FED are not worried about inflation,  typical.

Commodity Prices are soaring.

Comments

[Yann Leonidopoulos]

Dear Professor
All that seems correct but number of insider selling vs. buying has been steeply increasing since the beginning of the year (source: fintel.io/macro). If yields rise this should be good for banks yet banking executives sell their stock. Don't you find this strange ?

[Dennis Elam]

I have not seen the numbers on bank insiders selling. The fact may be the age of bankers today. How many remember 14% T Bonds in 1981, not man were around then. After years of lower rates, no doubt they may think these are high rates and the FED will magically bring them back down. CFR has had an amazing rally from the 60s to over 100. If you had options at 60 I can see the temptation to make a quick profit.