YC2YR 2-10 Yield Curve Daily Chart; Fibonacci Retracements

Treasury yields have been on a roller coaster ride since the August turmoil. For the last few years, Treasury yields have moved lower with the never-ending Federal Reserve money-printing policies. Keystone has described the ongoing disinflation and deflation back drop the last few years and finally the broad street consensus agrees that low and no inflation is here to stay (as Keystone now thinks the three-decade bond rally is coming to an end). Remember a few years ago, Keystone told you that in a few years, everyone would be on the bandwagon that inflation will not occur (giving up the thinking that inflation was coming any day) and that is when it will actually begin to occur.

The Fed started this sick Keynesian financial experiment in March 2009 to save the US stock market and protect America's wealthy class (that own large stock portfolios). This is the way the rigged crony capitalism system works. Ever since late 2009, there had been a steady drumbeat of analysts promising that inflation was around the corner. A decade later and inflation remains Godot. Sure, the central banks are printing money like madmen but the global economy continues to weaken and overall demand moves slowly and steadily lower.

Since many folks had been calling for inflation over the years, of course it never came. Now that everyone and his brother, even Aunt Ethel that rarely follows the bond market, say low inflation is here to stay for many years forward, that triggers your radar that the long three-decade bond rally may finally be at its end. There is likely an ongoing sideways chop that will occur in Treasury yields, with a very slight upward bias, for the weeks and months ahead, even a year or three forward.

The drop in global yields was dramatic in August as stock markets tanked. The 2-10 yield spread inverted joining the 3-month to 10-year yield spread that had already inverted for many weeks. The chart above is the 2-10 yield curve spread. The yield curve dramatically resteepened since September just as sharp as it flattened retracing 100% of the move towards inversion. In the last few days, the yield curve flattens again.

Keystone has talked about the hook pattern which brings on recession (in and out of inversion). Analysts say it will be 18 months before the recession appears after an inversion occurs so that places the recession at February 2021. This is one of the reasons traders remain bullish on the markets and economy and say all is clear and smooth sailing until 2021. However, no one has factored in the one-decade of obscene Keynesian money-printing. Perhaps the recession is here, standing next to you at the party, breathing on your neck, spilling smelly Fed punch on your sleeve, and you do not even realize it.

The yield curve above is reflattening in recent days and now at the important 38% Fibonacci retracement. In addition, this is the key 50-day MA support. Further, there is lots of support in this area from August and October. It is time to bounce, or die. If the yield curve further flattens, the 50% Fib and perhaps 62% Fib are on tap (further flattening). A bounce will likely take price to the 20 or 200-day and then spank it back down again. There is likely lots of sideways in Treasury yields going forward. Yields are likely at an inflection point today as the yield curve makes a decision at the 38% Fib retracement. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.