From Bill Gross writing at janus.com. See link to the left, Bill Gross Insights:
...yields must inevitably move higher during Trump's first year in office.
When the fundamentals are confusing, however, technical indicators may come to the rescue...
Shown in the chart below, it's obvious to most observers that 10-year yields have been moving downward since their secular peak in the early 1980s, and at a rather linear rate.
30 basis point declines on average for the past 30 years have lowered the 10-year from 10% in 1987 to the current 2.40%.
Chart: 10-year Treasuries returns for the past 30 years
Now, however this super strong, frequently tested downward trend line is at risk of being broken.
2.55% to 2.60% is the current "top" of this trend line, and over the past few weeks it has held and reversed lower by 15 basis points or so.
BUT----------. And this is my only forecast for the 10-year in 2017.
If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun.
- Watch the 2.6% level.
- Much more important than Dow 20,000.
- Much more important than $60-a-barrel oil.
- Much more important that the Dollar/Euro parity at 1.00.
- It is the key to interest rate levels and perhaps stock price levels in 2017.
Link: https://www.janus.com/insights/bill-gross-investment-outlook
