UST30Y 30-Year Treasury Bond Yield Monthly Chart; Three-Decade Bond Rally Ending

Time marches on. A few years ago, as the inflation talk ran rampant, Keystone told yinz that in a few years, all the inflationists will disappear and everyone will be resigned to the fact that low rates and low inflation, disinflation, is here to stay for the foreseeable future, many years ahead. Honey, we're home. Keystone has been in the deflation and disinflation camp for many years and everyone has finally come over to the house and joined him for the festivities. Well, that tells Keystone it is time for him to think about slipping out the back door and starting a new party down the street.

After over one-decade of obscene Keynesian money-printing by the Federal Reserve, inflation is finally appearing in the distant sunrise. Do not look for any big bump higher in inflation or yields over the coming months, however, yields should only bounce along the bottom from here on out and as the months, and year or two play out ahead, begin lifting, and then taking off firmly with inflation 2022 and on.

The jury remains out over the coming months and year or two as we enter into and live through a pending recession so the expected inflation behavior may be delayed for another year or two as 25% of Americans are handed pink slips. Things will likely become quite ugly, worse than the 2008-2009 Great Recession, in the weeks and months ahead, and a class war will begin in the United States that will continue for many years forward. 

The gap between rich and poor is the widest in 50 years. America is the land of the have's and have not's. The American Dream has become the American Joke; few talk about such lofty aspirations anymore. The central bankers are the market and it is only a question of whether they can save the day again when a massive stock market selloff occurs.

Market participants, strategists, analysts, traders, investors and money managers have been calling for inflation to occur since late 2009; all were wrong. Former Fed Chairman Bernanke, Helicopter Ben, implemented QE 1 (quantitative easing) in March 2009 to save the stock market and protect America's wealthy class (that own large stock portfolios). Fed members are rewarded for their loyalty to the Wall Street investment banks once they leave public office by receiving lucrative speaking fees to appear at token luncheons. Such is the crony capitalism system. No wonder it is on its last legs.

Anyhoo, to circle back around to the inflation theme, or more correctly the low inflation and disinflation theme, the 30-year bond yield chart above tells the story. Remember, US Treasury notes and bonds are in an epic three-decade rally (higher bond and note prices and corresponding lower yields).

Keystone calls the end of the massive three-decade bond rally. Keystone's call coincides with the universal consensus on Wall Street that low inflation will continue for many months and years forward (they were wrong saying inflation would appear between 2009 and now and will likely be wrong predicting continued low inflation and rates for the future).

The 30-year yield chart has and is bottoming out and will move flat and then sideways to sideways higher for yield for the many months and years ahead. The chart does not require yield to come back down again for a lower low unless something very bad happens in the economy or markets that will have to be priced-in. The thin blue lines show a steep downward channel that then mellows out into the softer green sideways channel with a downward bias. Yield popped off that lower green support line.

The chart indicators are in universal positive divergence (red lines). In addition, the RSI and stochastics are oversold needing to move higher. Yield is extended below the moving averages needing a mean reversion higher. Look for a potential cross on the Aroon that would pave the way to higher yields.

The ADX shows that for the dramatic collapse in yield this summer into the Fall, at 27, it is not registering as a strong downtrend. The last tiny sliver of a strong trend lower for yield was the move lower during 2011 into 2012 but very short-lived. All these parameters tell you that the 30-bond yield has bottomed on a long-term basis. If you look back to prior years, you will see the ADX above 30, indicating a strong trend lower, for yields each time they flushed lower during the years prior to 2012. That's when things changed. The ADX petered out over time and now says the trend lower in the 30-year bond yield has NOT been a strong trend lower since 2012.

The expectation is for multiple months of sideways to sideways higher yields. The wildcard is any potential stock market selloff and recession. Today stocks are selling off so some money seeks perceived safety in Treasuries driving yields lower. Thus, the yields may bounce around the lows into next year but as per the chart above the bottom is in for the 30-year yield and it should not take out that low point just under 2.0%. The only caveat is if some black swan or major market crash occurs since folks will be buying Treasuries like madmen driving yields lower which may take out the 2% level, and then the chart will price that action in.

Things are buttoned-up down there at the bottom a gap is at that 2.18%-2.19%-ish area so that is where yield may want to go down to for a look. The way to look at it is that Treasury yields will chop sideways for several months perhaps through 2020; yields moving lower but not taking out the low above unless the economy is in very dire straits in the future. Yields are expected to move sideways to sideways higher for the months and years ahead. Credit goes to A. Gary Shilling the only analyst on Wall Street that correctly called the 30-year bond rally and corresponding deflationary impacts.

The 30-year yield will likely chop sideways, likely moving down to 2.18%-ish in the near-term, and then up to 2.45% and 2.60% likely next year some time, but favor a sideways chop through 2.2%-2.8% in 2020 overall. 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.

Note Added 10:17 AM EST: Stocks are tanking the SPX losing 35 points, -1.1%, to 3078. Thus, traders are seeking the perceived safety of notes and bonds so the 30-year bond yield drops to ..... wait for it........ wait a bit longer for it........ 2.19%.

Note Added 10:31 AM EST: 30-year yield 2.18%.


Note Added 10:55 AM EST: 30-year yield 2.16%.

Note Added Wednesday Morning, 12/4/19, at 8:11 AM EST: The 30-year yield bumps around the 2.16%-2.19% area now at 2.19%.

Note Added Wednesday, 12/4/19, at 11:54 AM EST: 30-year yield 2.24%. So far, yield comes down to play around that 2.16%-2.18% area and then move higher again.