While everybody has been focused on the stock market holding the lows from Jan 22-23, less noticed has been the fact that long term treasuries are holding their highs from the same period (30 Year T Bond Chart).
As you can see from the chart, the 30 year treasury gapped up on January 22, as Bernanke cut interest rates by 75 basis points. A gap up in prices means a gap down in interest rates as the two are inversely related.
Focusing on the 10 year, it put in a bottom at 3.40% on Jan 22-23 and has been rising since.
To me, the meaning is clear: with the Fed cutting rates and seemingly committed to more cuts, the bond market is starting to price in rising inflation.
Many commentators have noted this:
“Bad News For Bonds” (subscription required), Michael Kahn, Barron’s, Thursday February 21
“Look out below if long rates go higher”, Tom Petruno, LA Times, Saturday February 16
“Long Term Interest Rates Set To Resume Downtrend?”, BeSpoke Investment Group, Wednesday February 27