Bond yields are rising again. This week we saw the 30 year U.S. Treasury bond close at 3.17%, which does not seem like a particularly important or even dangerous number. In the grand scheme of things it isn't. But it is a very bearish number on a weekly basis looking at a chart of the yield when we look at it within the context of the monthly chart. Rising bonds yields could be the work of the Fed or it could be strategic selling now that the U.S. economy looks like it is in worse shape than what was expected earlier in the year.
Here's a weekly chart of 30 year U.S. bond yields.
(click to enlarge)
This week's price action took yields as high as 3.20%. So, for the month of May we have had steady net selling in treasuries which has sent the U.S. Dollar soaring versus just
The US dollar posted strong across the board gains. It is being driven by the anticipation of favorable developments in the US, in the form of a possible slowing of the Fed's asset purchases, and less favorable developments abroad.
While it is technically poised for additional gains, the biggest risk to the dollar comes from Fed Chairman Bernanke's midweek testimony. His commitment to QE and readiness to taper purchases, as others have suggested, will be closely scrutinized. The failure to confirm these growing market ideas, spurred in part by comments from two (non-voting) regional Fed presidents, could prompt some profit-taking on long dollar positions.
While speculation that the Fed may take one of its feet off the accelerator in the next month helped lift the dollar, other countries are easing policy. There has been even more talk about the ECB adopting a negative deposit rate. Continued sub-50 readings in the
It has been a great week for the USD as it gained against all the majors. The New Zealand dollar was the last market where the futures traders were long. Early in the week, the kiwi bought .8316 cents per USD, but by the end of the week, it was down under the 81 handle. Should the weekly chart close around this level, it looks like there will be some more to the downside. Remember one of the tricks of The Turtles, as taught by Ritch Dennis, was to hammer a weak Friday close, or, if the market is soaring, buy some more. Their theory was markets will continue their momentum. Speculators, according to last week's COT report, were big longs in this very small market. This could get ugly.
We doubt, however, it will get as ugly as has the AUD versus the USD (AUDUSD, FXA), Two weeks